Digital Core REIT - DBS Research 2022-01-14: A Premier Global Data-Centre Play

Digital Core REIT - A Premier Global Data-Centre Play

  • We initiate coverage of Digital Core REIT (SGX:DCRU) with a target price of US$1.40.
  • Earnings underpinned by solid fundamentals. With a portfolio of fully occupied data centres with a long WALE of ~6.2 years, this ensures Digital Core REIT's income stability and visibility. In addition to the booming data centre industry, annual rental escalations of ~2% for its portfolio provides for organic growth in earnings.
  • A pipeline that could make Digital Core REIT one of the largest S-REITs. With strong commitment from its sponsor, Digital Core REIT has been granted a Rights of First Refusal (ROFR) to ~US$15bn worth of data centres globally. In addition, the sponsor has a further US$5bn worth of data centre developments that could potentially be made available to Digital Core REIT when completed.
  • Our target price of US$1.40 for Digital Core REIT is based on DCF with a WACC of 5.3% (risk-free rate of 2.0%). This implies a normalised target yield of 3.6% in the next two years. We have assumed a total of US$750m in acquisitions over the next two years.
  • Catalysts baked into our valuations for Digital Core REIT are
    1. an assumed US$250m of debt-funded acquisitions in FY22 and
    2. a further assumed US$500m of acquisitions funded by both debt and equity by FY23.
  • These are expected to drive a 3-year DPU CAGR of ~7% during FY21-24F and 10-11% above IPO forecasts.
  • Key risks to our view would be the slower-than-anticipated acquisition growth and a spike in borrowing costs.

Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @

Dale LAI DBS Group Research | Derek TAN DBS Research | 2022-01-14

Read also DBS's most recent report:
2022-11-21 Digital Core REIT - To Buyback Or Not To Buyback?.

Previous report by DBS:
2022-10-27 Digital Core REIT - Acquisition Of Frankfurt Data Centre On The Horizon.

Price targets by other brokers at Digital Core REIT Target Prices.
Listing of research reports at Digital Core REIT Analyst Reports.

Relevant links:
Digital Core REIT Share Price History,
Digital Core REIT Announcements,
Digital Core REIT Dividends & Corporate Actions,
Digital Core REIT News Articles

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