KEPPEL Data Centre (DC) Reit on Tuesday reported a distribution per unit (DPU) of 4.795 Singapore cents for the second half of the fiscal year ended December 2020, 27.5 per cent higher than the DPU of 3.76 Singapore cents paid out in the year-ago period.

 

This lifted the Reit' s DPU for FY 2020 to 9.17 Singapore cents, some 20.5 per cent higher than the adjusted distribution of 7.61 Singapore cents in FY 2019.

 

Distributable income for the period rose by 39.1 per cent year-on-year to S$81.9 million from S$58.9 million, pushing the Reit' s distributable income for FY 2020 to S$156.9 million, an increase of 38.6 per cent from FY2019.

 

Keppel DC Reit said the growth in distributable income was supported by full-year contributions from Keppel Data Centre (DC) Singapore 4 and DC1, as well as its new acquisitions in Europe.

 

Gross revenue for H2 grew 42.6 per cent to S$141.6 million from S$99.3 million last year.

 

Meanwhile, property expenses for the period increased 36.7 per cent to S$11.7 million from S$8.5 million in the year-ago period.

 

Consequently, net property income rose 43.1 per cent to S$129.9 million from S$90.8 million in the year-ago period.

 

The Reit manager said the company had capitalised on strong demand for data centre space by undertaking proactive asset management initiatives to improve portfolio occupancy.

 

As at end-December, Keppel DC Reit had a portfolio occupancy rate of 97.8 per cent with a weighted average lease expiry (WALE) of 6.8 years.

 

The Reit also has an aggregate leverage of 36.2 per cent, which gives it " comfortable debt headroom" for acquisition growth and asset enhancement initiatives.

 

In addition, Keppel DC Reit' s assets under management as at end-December 2020 stood at approximately S$3.0 billion, an increase from S$2.6 billion as at end-2019.

 

The distributions for H2 will be paid out to unitholders on March 8.

 

In its outlook, the manager of Keppel DC Reit said it expects the global trend of digitalisation to continue post-pandemic as the digital economy continues to thrive amid the Covid-19 pandemic.

 

While the manager acknowledged that the resilience and rapid growth of the DC market have attracted more competition for assets and capital, the barriers of entry for the sector remain high, especially for quality co-location assets.

 

" The manager' s track record, coupled with the ability to leverage the Keppel ecosystem in providing end-to-end solutions from project development and facilities management to client networking, have ensured that Keppel DC Reit is well-positioned to benefit from the growth of the data centre market," said the manager.

 

KEPPEL Data Centre (DC) Reit on Tuesday posted a distribution per unit (DPU) of 2.357 Singapore cents for the third quarter, up 22.1 per cent from a year ago.

 

Distributable income jumped 47.6 per cent to S$40.48 million on the back of new acquisitions, it said in its operational update.

 

Meanwhile, net property income was up 47.6 per cent to S$62.37 million gross revenue rose 46 per cent to S$67.67 million.

 

The Reit manager said that there was strong leasing momentum during the quarter, with new take-ups at co-location facilities in Singapore and Dublin. It also secured lease renewal at iSeek Data Centre in Brisbane, Australia.

 

As at Sept 30, 2020, it had portfolio occupancy of 96.7 per cent and weighted average lease expiry of 7.2 years by leased area.

 

Net asset value per unit stood at S$1.16, up from S$1.14 as at end-December.

 

The Reit' s average cost of debt was 1.6 per cent per annum, and its interest coverage ratio was at 12.7 times. Average leverage was 35.2 per cent as at Sept 30, up from 30.7 per cent as at end-December.

 

Some 68 per cent of its borrowings are hedged over the entire loan term, with the remaining unhedged borrowings in euro. The Reit is also hedging forecasted foreign-sourced distributions till H1 2022, with foreign currency forward contracts.

 

In its industry outlook, the manager noted that Covid-19 and changes in working practice have accelerated the shift to hosted and cloud-collaboration solutions. Annual spending on cloud services is expected to double in four years. The pandemic has also accelerated the move to keep data in-country because of stricter border controls and more stringent security and data sovereignty regulations, it said.

 

The manager said that it will continue to strengthen Keppel DC Reit' s presence and position it to capitalise growth opportunities in the data centre industry.

 

Keppel DC Reit became a component stock of the Straits Times Index (STI) on Oct 19, with the exit of CapitaLand Commercial Trust ahead of its its merger with CapitaLand Mall Trust.

 

On Sept 15, Keppel DC Reit Management Pte Ltd CEO Chua Hsien Yang sold 700,000 units of Keppel DC Reit at S$2.97 per unit. This reduced his total interest to 632,364 units or 0.04 per cent.

 

Keppel DC Reit Management Pte Ltd is the manager of Keppel DC Reit. Keppel DC Reit Management Pte Ltd has had long-term incentive schemes including the awarding of vested Keppel DC Units, in which Mr Chua has participated.

 

From its listing date in November 2014 through to the Sept 15 close, the unit price of Keppel DC Reit had gained 236 per cent with reinvested dividend distributions taking the total return to 342 per cent.

 

The data centre Reit has also been among the 25 best performing Reits globally in the 2020 year to Sept 17.

 

Mr Chua has extensive experience in real estate funds management and the hospitality industries, with more than 17 years of experience in mergers and acquisitions, real estate investments, fund management, business development and asset management in the real estate sector within the Asia-Pacific region.

 

Prior to joining the manager, Mr Chua has held the position of senior vice-president of Keppel Reit Management Ltd, the manager of Keppel Reit, since May 2008, where he headed the investment team.

 

DBS Group Research and CGS-CIMB have raised their target prices for Keppel DC Reit, citing expected acquisitions and ongoing asset enhancement initiatives (AEI) at the real estate investment trust' s (Reit) data centres. 

 

In a research report on Wednesday, DBS analysts Dale Lai and Derek Tan raised the price target to S$2.80 from S$2.55. CGS-CIMB analysts Eing Kar Mei and Lock Mun Yee in a Tuesday report raised their target price to S$2.88 from S$2.17

 

Both sets of analysts maintained their " hold" calls.

 

Units of Keppel DC Reit were trading flat at S$2.75 as at 11.35am on Wednesday.

 

In their report, Mr Lai and Mr Tan said they raised the price target to reflect current market conditions and factor in improved efficiency of properties.

 

They maintained their " hold" call as the Reit' s unit price is at an all-time high, after rallying more than 8 per cent over the past two weeks. The stock has only a 2 per cent potential upside, and is trading at a forward yield of 3.2 per cent, they said.

 

Meanwhile, Ms Eing and Ms Lock noted that while Covid-19 had fuelled further demand and underpinned the importance of data centres, this demand had been priced in.

 

They raised their FY21-22 distribution per unit (DPU) forecast for the Reit by 4-4.5 per cent, and rolled over their FY21 target price to S$2.88, after factoring in a S$300 million acquisition and reducing their cost of equity assumption.

 

The Reit on Tuesday posted a DPU of 4.375 Singapore cents for the half year ended June 30, up 13.6 per cent from 3.85 cents a year ago. 

 

Ms Eing and Ms Lock noted that the Reit' s " strong" results were mainly driven by the acquisition of its Keppel DC Singapore 4 and DC1 data centres in Q4 2019, and its Kelsterbach data centre in May 2020.

 

" On the acquisition front, we understand that Keppel DC Reit is close to finalising a deal, which could happen as soon as Q3," they added. " The Reit is evaluating a wide range of deals which include new and existing countries with cap rates in the range of 4-7 per cent."

 

As the sponsor&rsquo s assets will not be ready in 2020, acquisitions in 2020 will be from third parties, Ms Eing and Ms Lock said.

 

In their report, DBS' s Mr Lai and Mr Tan also noted that the Reit was " on track to deliver acquisitions in FY20" , even though prolonged travel restrictions due to the Covid-19 pandemic had hampered acquisition plans, especially as the Reit is targeting overseas acquisitions.

 

" Even though we are past the half-year mark for FY20, we believe Keppel DC Reit will speed up its acquisition momentum as it has been working on these deals throughout the lockdown period," they added.

 

Mr Lai and Mr Tan said the Reit' s low weighted average cost of capital was " a plus for any equity fundraising exercise, as almost any deal is likely to be accretive" .

 

" Despite this, we are confident that management will acquire responsibly and are not averse to lower yielding acquisitions, as long as there is long-term income stability and future growth potential," they added.

 

The DBS analysts also cited higher-than-expected growth and returns as a potential catalyst, noting that the Reit' s AEIs and development projects had been delayed due to the pandemic.

 

" As works gradually resume, catalysts to look out for include shorter-than-expected delays to project completions and acquisitions that are more accretive than projected," they said.

 

In their report, CGS-CIMB' s Ms Eing and Ms Lock also noted that Keppel DC Reit' s ongoing AEIs could " drive organic growth" .

 

The AEI at its Keppel DC Dublin 1 data centre had resumed and is expected to be completed in the second half of the year, subject to further delays caused by the pandemic. The Reit also commenced works to convert additional space at Keppel DC Dublin 2 into a data hall, with an expected completion in the first half of 2021, they added.

 

However, AEIs for the Reit' s Keppel DC Singapore 5 and DC1 data centres in Singapore remain suspended. They were originally scheduled to be completed in the second half of the year, the analysts said.

 

The additional power capacity at Keppel DC Singapore 5 has been fully committed by an existing client, while the Reit is in talks with potential clients to take up additional power capacity at Keppel DC Dublin 1 and Dublin 2.

 

KEPPEL Data Centre (DC) Reit on Tuesday posted a distribution per unit (DPU) of 4.375 Singapore cents for the half-year ended June 30, up 13.6 per cent from 3.85 cents a year ago.

 

Distributable income rose 38 per cent to S$75 million, largely driven by the acquisitions of Keppel DC Singapore 4 (KDC SGP 4) and DC1 Singapore data centres in Q4 2019. Keppel DC Reit had raised S$478.2 million in September last year through a private placement and preferential offering to partially fund the acquisitions.

 

Net property income was 32.1 per cent higher at S$114.2 million, while gross revenue increased 29.8 per cent to S$124 million.

 

Gross rental income grew 31.7 per cent to S$120 million due to the acquisitions of KDC SGP 4 and DC1, as well as Kelsterbach Data Centre in Germany, completed on May 1, 2020.

 

Portfolio occupancy was 96.1 per cent as at June 30, 2020, with a weighted average lease expiry (WALE) of 7.4 years.

Following the completion of the acquisitions of Kelsterbach DC and the remaining 999‐ year leasehold land interest at Keppel DC Dublin 1 in H1, the Reit&rsquo s assets under management as at June 30, 2020 was increased to S$2.8 billion.

 

The Reit has 2.6 per cent of total net lettable area (NLA) up for renewal in the second half of 2020. The manager has started engaging clients for early renewals and lowered the total NLA due for expiry in 2021 from 10.7 per cent as at end‐ 2019 to 6.2 per cent as at June 30, 2020.

 

Net asset value per unit stood at S$1.17 as at June 30, 2020, up from S$1.14 as at end-Dec.

 

The Reit&rsquo s average cost of debt was at 1.7 per cent per annum, and its interest coverage ratio was at 12.8 times as at June 30. Aggregate leverage was 34.5 per cent as at June 30, up from 30.7 per cent as at end-December.

 

Asset-enhancements works at Keppel DC Dublin 1 have resumed following the two-month lockdown by the Irish government, and are expected to be completed in H2. Additional space at Keppel DC Dublin 2 is currently being converted into a data hall, to be completed in H1 2021.

 

In Singapore, the additional power capacity at Keppel DC Singapore 5 has been fully committed by an existing client in the facility. Asset enhancement works at Keppel DC Singapore 5 and DC1 remain suspended.

 

The manager said prospects for the data centre market remain robust, underpinned by strong digital trends such as rapid cloud adoption, smart technologies, big-data analytics and 5G deployment.

 

It noted that the widespread lockdowns due to the pandemic have accelerated the adoption of technology. " The data-centre industry remains resilient, supporting data storage and processing requirements of the digital economy," said the manager.

 

Unitholders can expect distributions to be paid on Sept 1, 2020.