The management is not too worried about the fluctuations in the REIT&rsquo s earnings post-pandemic.They believe the pandemic has accelerated the adoption of technology and changed the way we learn, work, and shop. They expect the end-user global demand for data centres to maintain post-pandemic. On the other hand, they are proactively engaging with banks to refinance approximately one-tenth of its total debt that will be due by the end of 2021.
Keppel DC REIT enjoys industry tailwinds which will bolster its growth for the foreseeable future. The pandemic has accelerated the adoption of digital habits and the Southeast Asia data centre market is projected to grow 12.9% annually until 2024.

Due to the optimism surrounding the data centre industry, Keppel DC REIT trades at a premium. Based on its FY2020 DPU, its distribution yield is currently at  3.5%. Investors seeking a higher yield may prefer to wait for a better opportunity. At the same time, investors can also reasonably expect the REIT&rsquo s DPU to increase and improve their  yield-on-cost  over the long run.

The Singapore government&rsquo s  moratorium  on new data centres in the country bodes well for the REIT&rsquo s existing data centres.  Facebook  also announced its recent partnership with Keppel, Telin, and XL Axiata to build two new subsea cables, namely Echo and Bifrost.The REIT stands to benefit from the enhanced connectivity and low latency from Singapore to the west coast of North America once the cables are completed. The cables also give the REIT a competitive edge compared to its regional peers.

The management undertook a number of asset enhancement initiatives (AEIs) in 2020 to further increase the REIT&rsquo s DPU.  These AEIs include the  fit-out works at Keppel DC Singapore 5, and energy efficiency and power capacity works at Keppel DC Dublin 1. This increased their occupancy rates for Keppel DC Singapore 5 and Keppel DC Dublin 1 from 84.2% and 65.7% in 2019 to 100% and 81.2% in 2020 respectively.

In  Q1 2021, fit-out works at DC1 were also completed while some unutilised space at Keppel DC Dublin 2 was converted into a data hall for a client. DC1 is fully leased to 1-Net Singapore via a  triple-net lease.  The  REIT&rsquo s portfolio occupancy stood at 97.8% in 2020 while its long weighted average lease expiry of 6.8 years gives unitholders strong income stability.

Listed in 2014, Keppel DC REIT is the first pure-play data centre REIT listed in Asia and on the Singapore Exchange. As of December 2020, it owns 19 data centres in eight countries across Asia Pacific and Europe with the entire portfolio valued at $3.0 billion.

The REIT is one of the companies that actually benefited from the COVID-19 pandemic and delivered a better year-on-year performance in 2020. The pandemic has spurred the digital transformation in our everyday lives ranging from remote working to video streaming. The corresponding surge in internet traffic further reinforces the strong demand for data centres.

Keppel DC REIT oversold

Keppel DC REIT  is at a one-year low. Technically, it broke below the twice-tested $2.53 level, indicating a downside of $2.33. At present, short term indicators are sufficiently oversold to trigger a rebound, and minor support at $2.40 could also lead to a bounce. Resistance for the bounce is at $2.53. Its 1HFY2021 results due out later this month, could shed more light into the sell-down. By then, prices could have bottomed.