Keppel DC REIT Review @ 27 April 2022

Basic Profile & Key Statistics

• Main Sector(s): Industrial
• Country(s) with Assets: Singapore, Australia, Ireland, Germany, Netherlands, China, England, Italy & Malaysia
• No. of Properties (exclude development/associate/fund): 21

Performance Highlight

Gross revenue and NPI have declined slightly but DPU remains more or less the same. The increase in distributable income and DPU are mainly due to recent data centre acquisitions and investment in NetCo Bonds and Preference Shares but partially offset due to higher electricity cost and provision made for KDC SGP 1.

Sensitivity to Interest Rate

For every 1% increase in interest rate, DPU would decline by 1%.

Related Parties Shareholding

• REIT sponsor's shareholding: Below median for more than 20%
• REIT manager's shareholding: Below median for more than 20%
• Directors of REIT manager's shareholding: Below median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median for more than 20%
• Highest lease expiry within 5 years: Below median for more than 10%; Falls in 2024 
• Weighted Average Land Lease Expiry: Below median for more than 10%

Debt Profile

• Gearing ratio: ± 10% from median
• Cost of debt: Below median for more than 20%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: All debts are unsecured debts
• WADM: Above median for more than 20% 
• Highest debt maturity within 5 years: Below median for more than 20%; Falls in 2026
• Interest coverage ratio: Above median for more than 20%

Diversification Profile

• Top geographical contribution: ± 10% from median
• Top property contribution: Below median for more than 20%
• Top 5 properties' contribution: Below median for more than 10%
• Top tenant contribution: Above median for more than 20%
• Top 10 tenants' contribution: Above median for more than 20%

Key Financial Metrics

• Property yield: Above median for more than 20%
• Management fees over distribution: ± 10% from median; $ 7.30 distribution for every dollar paid 
• Distribution on capital: Above median for more than 20%
• Distribution margin: Above median for more than 20%

Trends

• Uptrend: DPU, NAV per Unit, Interest Coverage Ratio, Distribution Margin
• Slight Uptrend: Distribution on Capital
• Slight Downtrend: Property Yield

Relative Valuation

• P/NAV: Below -1SD for 1y & 3y; Average for 5y
• Dividend Yield: Above +2SD for 1y; Above +1SD for 3y; Average for 5y

Author's Opinion

Favorable	Less Favorable
High Occupancy	Low REIT Sponsor's Shareholding
Long WALE	Low REIT Manager's Shareholding
Well Spread Lease Expiry	Low Directors of REIT Manager's Shareholding
Low Cost of Debt	High Top Tenant & Top 10 Tenants Properties
100% Unsecured Debt
Long WADM
Well Spread Debt Maturity
High Interest Coverage Ratio
Low Top Property & Top Properties Contributions
High Property Yield
High Distribution on Capital
High Distribution Margin
DPU Uptrend
NAV per Unit Uptrend
Interest Coverage Ratio Uptrend
Distribution Margin Uptrend

Despite the slight decline in gross revenue and NPI, the DPU is unaffected due to the recent acquisitions and investments in NetCo Bonds and Preference Shares. From the presentation, a 10% increase in electricity costs would have an approximately 3% impact on pro forma DPU of  FY 21. As for the dispute at KDC SGP 1, the amount being disputed is around S$ 14.8 mil for 4 years, which might impact around 2% of pro forma DPU of FY21.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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Singapore REITs Post Telegram Channel - Join to receive posts for Singapore REITs

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REIT Investing Community - Facebook Group where members share and discuss REIT topic

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.