Keppel DC REIT - OCBC Investment 2020-04-23: In A Mission Critical Sweet Spot

KEPPEL DC REIT (SGX:AJBU) | SGinvestors.io KEPPEL DC REIT (SGX:AJBU)

Keppel DC REIT - In A Mission Critical Sweet Spot

  • Keppel DC REIT's 1Q20 DPU grew 8.6% y-o-y.
  • COVID-19 pandemic has expedited the adoption of technology.
  • Raise Fair Value to S$2.54.



1Q20 results met our expectations

  • Keppel DC REIT (SGX:AJBU)’s 1Q20 results came in within our expectations. Gross revenue and NPI jumped 25.5% and 28.3% y-o-y to S$60.3m and S$55.4m, respectively.
  • DPU rose 8.6% y-o-y to 2.085 S cents, and this formed 23.5% of our FY20 forecast.


Operational metrics stable; robust industry outlook

  • Operationally, Keppel DC REIT’s portfolio occupancy declined marginally by 0.2 ppt q-o-q to 94.7%, as there was a tenant which downsized its operations at KDC SGP 2, although this tenant also renewed its lease for the remaining space it was occupying.
  • Portfolio WALE remains long at 8.3 years, with only 4.0% and 8.7% of its leases expiring in FY20 and FY21, respectively.
  • Management highlighted that its operations have not experienced any disruptions despite the COVID-19 outbreak, given that its data centres are mission critical facilities. In fact, the COVID-19 pandemic has expedited the adoption of technology, and the current level of data usage is something which was only expected to be seen when 5G is rolled out commercially.
  • However, as clients typically contract additional rack space ahead of time (i.e. keep some spare capacity for future expansion), Keppel DC REIT does not expect to see a jump in revenue during this period. There are also potential supply chain disruptions of servers and racks which may stifle clients’ expansion plans.
  • In terms of financial position, Keppel DC REIT’s aggregate leverage was healthy at 32.2%. We believe Keppel DC REIT will seek to make acquisitions this year, although doing physical due diligence is a challenge now.


Expected resiliency to shine through amid subdued macroeconomic environment






OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2020-04-23
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.54 UP 2.260



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