Keppel DC REIT - DPU Growth Against The Odds
- Keppel DC REIT (SGX:AJBU) reported 1H22 gross revenue of S$135.5m (+0.3% y-o-y) and distribution income of S$91.2m (+8.2%). DPU of 5.049 cents (+2.5% y-o-y) was within expectations at 49.7% of our FY22F forecast.
- The improved topline performance was due to contributions from accretive acquisitions in China, the UK and Netherlands, and AEIs as well as positive rental reversions, partly offset by weaker Euro, GBP and AUD and provision for payment at KDC SG1, excluding which, 1HFY22 revenue would have been 5-6% higher.
- DPU performed better y-o-y, due to income from Netco bonds and FX hedges on ~90% of overseas income, which will run until 2HFY23.
- Keppel DC REIT de-risked leases expiring at KDC SG4, extending KDC SG4’s WALE from 0.4 years to 2.9 years as at 1HFY22. We understand from management that reversions were positive. Portfolio occupancy slid q-o-q from 98.7% to 98.2% due to a non-renewal at KDC SG1, and downsizing on renewal at Basis Bay.
- Management continues to see demand for data centres (DC) in Singapore and is not concerned about the minor occupancy fluctuation within its Singapore portfolio. It will work towards backfilling Basis Bay but will consider divesting the asset if presented with a suitable offer.
- Keppel DC REIT has 2% of NLA (net lettable area) to be de-risked by end-FY22.
- Management indicated that it continues to evaluate potential new deals in APAC and Europe. It also shared that investor demand for DCs remains healthy and cap rates remain stable.
- Keppel DC REIT's gearing came in at 35.3% in 1HFY22. Average cost of debt remains low, albeit up from 1.8% to 1.9%. Approximately 76% of borrowings have been hedged into fixed debt with a weighted average hedge tenor of 3.6 years.
- We keep our FY22-24F DPU estimates for Keppel DC REIT unchanged and maintain our DDM-based target price of S$2.63.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2022-07-26 2022-07-26
Previous report by CGS-CIMB:
2022-06-21 Keppel DC REIT - Deepens Footprint In China
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