Benjamin Cher

 

SINGAPORE (Nov 29): DBS Vickers Securities is maintaining its &ldquo buy&rdquo call on Keppel DC REIT with a revised target price of $1.33, after rolling forward valuations and pricing in the recently-announced acquisition of Keppel DC Singapore 3 (KDC SG 3), a carrier-neutral data centre in Singapore formerly known as T27 or Keppel Datahub 2.

To recap, Keppel Data Centres Holding (KDCH) &ndash a joint venture between Keppel Telecommunications & Transportation (Keppel T& T) and Keppel Land &ndash in October announced the divestment of 90% of KDC SGP 3 to Keppel DC REIT via share sale for an aggregate consideration of $141 million.

In a Tuesday report, analysts Derek Tan and Mervyn Song say the acquisition of KDC SG 3 will further diversify the REIT&rsquo s earnings base as well as fuel a stronger earnings growth trajectory of 5% going forward.  

According to the analysts, the $279.5 million in new equity raised to fund the deal has improved Keppel DC REIT&rsquo s liquidity and strengthened its balance sheet, positioning the REIT &ldquo for another year of strong growth driven from acquisitions&rdquo .

Further upside to the deal will come from the management&rsquo s ability to garner tax transparency status, they add.

In Tan and Song&rsquo s opinion, the REIT is &ldquo projected to deliver a solid 5% CAGR in distributions supported by positive market dynamics&rdquo , and this is supported by low gearing coupled with low cost of capital which empower the REIT with financial capacity to acquire accretive assets.

&ldquo Given the larger-than-anticipated fund raising coupled with capital committed to acquire two further data centres worth a collective $111.7 million, we project KDC REIT&rsquo s gearing to remain fairly conservative at c.29%, keeping the powder dry for the REIT to acquire more assets,&rdquo say the analysts.

Units of Keppel DC REIT closed at $1.20.