KEPPEL DC REIT
AJBU.SI
Keppel DC REIT - Acquisition of T27 is imminent
- S$24.77mn gross revenue missed consensus expectations of S$26.55mn by 6.7%; and missed our expectation of S$26.10mn by 5.1%.
- 1.67 cents DPU missed our expectation of 1.76 cents by 5.1%.
Negotiations are ongoing to raise occupancy at Citadel 100
- Occupancy at Citadel 100 is now 52.8% compared to 77.4% in 4QFY15.
- As guided by the Manager during the previous quarter, a tenant downsized in the late part of 1QFY16. The full effect will be felt in 2QFY16, which we estimate to negatively impact portfolio rental income by c.4% and had previously incorporated that into our forecasts.
- The Manager is in negotiations with a few prospective tenants who should be able to take up the bulk of the vacant space.
- The Manager does not expect the new rent to differ too much from what the existing tenant was paying.
Work at mainCubes Data Centre has commenced
- The land has been cleared and awaiting issue of the building permit to begin actual construction work. Keppel DC REIT (KDCREIT) has paid a 10% deposit for the data centre and will pay the remaining 90% upon project completion (expected 2018).
- The Manager has not locked in the currency exchange for that payment as it is still 2-years out. No material changes to the REIT with the transfer of the Manager under Keppel Capital Post-consolidation of Keppel Corp's interests in asset management and private equity under Keppel Capital, Keppel T&T will remain as the Sponsor and continue to support KDCREIT's growth.
Acquisition of T27 is imminent; equity fund raising (EFR) highly likely
- The Manager shared that T27, a data centre from the Sponsor's Right of First Refusal (ROFR) portfolio, is fully-committed and is in negotiations to acquire it.
- The Manager expects the acquisition to be in 2Q or 3QFY16, is exploring the optimum capital structure for the acquisition and does not rule out an EFR.
- We note that KDCREIT's gearing is currently 29.6% and we estimate a debt headroom of c.S$113mn, assuming 40% gearing. Bearing in mind the Manager's long-term target of 30% gearing and T27 being in the order of S$250mn, an EFR is highly likely.
Maintain "Accumulate" rating with unchanged DDM valuation of S$1.13
- 1QFY16 gross revenue and DPU met 23.9% and 25.2% of our full year estimates respectively.
- We have adjusted our FY17e and FY18e gross rental income marginally downwards by less than 1% each, as we update the assumptions for currency forwards.
Richard Leow CFTe
Phillip Securities
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http://www.poems.com.sg/
2016-04-14
Phillip Securities
SGX Stock
Analyst Report
1.13
Same
1.13
