Keppel DC REIT - CGS-CIMB Research 2021-04-20: Continued To Deliver But Priced In

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KEPPEL DC REIT (SGX:AJBU)

Keppel DC REIT - Continued To Deliver But Priced In

• Keppel DC REIT's 1QFY21 DPU of S$0.0246 (+18.1% y-o-y) came in line with our full-year forecast.
• The stronger revenue and NPI were driven by acquisitions and AEIs.
• Demand for data centres continued to be strong, but we believe this has been priced in.
• Keppel DC REIT is trading at < 4% dividend yield. Reiterate HOLD.

KDCREIT's 1QFY21 performance driven by acquisitions and AEIs

• Keppel DC REIT (SGX:AJBU)’s 1QFY21 DPU of 2.46 cents (+18.1% y-o-y) came in within our expectations at 24% of our full-year forecast.
• 1QFY21 revenue increased by 10.6% y-o-y to S$66.7m, while NPI was up 10% y-o-y to S$61m. The strong set of results was mainly due to the acquisition of Kelsterbach DC, a data centre in Amsterdam and AEIs in 2020.
• Portfolio occupancy remained healthy at 97.8% with a long WALE of 6.6 years by leased area. It has 7% of NLA (28% by rental income) up for renewal in 2021. We believe these leases would be renewed given the strong stickiness of data centre customers.
• While the demand for data centres is strong, rental reversion should be relatively stable as the REIT retains the long-term relationship with its customers.

AEIs completed on time and have been leased out

• Keppel DC REIT has completed the fit-out of a new 1-Net Singapore on a fully-fitted basis.
• Dublin 2 has achieved practical completion of AEI works. Additional data hall space for this asset has been committed by an existing client and IT power is fully contracted.

Continues to look for acquisitions

• We understand that Keppel DC REIT is still actively looking for S$134m which supports potential acquisitions. Keppel DC REIT remains comfortable even if gearing hits 40%.
• Given the high occupancy of most of the REIT’s data centres, we think acquisitions are essential to drive substantial DPU growth.

Reiterate HOLD on KDCREIT

• We maintain our Keppel DC REIT's FY21-22F DPU and DDM-based target price at S$2.86. COVID-19 has fueled further demand for and underpinned the importance of data centres, but we believe this has been priced in.
• Keppel DC REIT is trading at < 4% dividend yield.
• Upside/downside risks include higher/lower accretion from acquisitions.
• See Keppel DC REIT Share Price; Keppel DC REIT Target Price; Keppel DC REIT Analyst Reports; Keppel DC REIT Dividend History; Keppel DC REIT Announcements; Keppel DC REIT Latest News.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-04-20

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.860 SAME 2.860