Keppel DC REIT Review @ 8 February 2023

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): 23

Key Indicators

Performance Highlight

Gross revenue and NPI improved yoy mainly due to contributions from Guangdong DC 1, 2 and building shell of Guangdong DC 3, London DC, Eindhoven DC, positive income reversions, as well as contributions following the completion of AEIs at DC1 and the Dublin assets, and the completion of IC3 East DC. Higher finance income mainly comes from income from NetCo bonds and coupon income from Guangdong Data Centre 3. The distributable units and DPU have improved as well.

Acquisition

The acquisition of the building shell of Guangdong Data Centre 3 was completed in Aug 2022. It is expected to be fully-fitted by 3Q 2023.

Sensitivity to Interest Rate

For every 1% increase in interest rate, the DPU impact would be 2.1% based on 3Q 2022 DPU.

Distribution Breakdown

• Distributable Income Breakdown:
• 97.1% from Operation
• 2.7% from Fees Payable/Paid in Units
• 0.2% from Income Support
• Distribution = 94.9% of Distributable Income

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: ± 10% from median; Falls in 2024
• Weighted Average Land Lease Expiry: Below median for more than 20%'

Debt Profile

• Gearing Ratio: ± 10% from median
• Cost of Debt: Below median for more than 10%
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: 100%
• WADM: Above median for more than 20% 
• Highest Debt Maturity within 5 Years: Above median for more than 20%; Falls in 2027
• 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; $ 6.67 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, Occupancy, Distribution Margin
• Flat: Distribution on Capital
• Downtrend: Interest Coverage Ratio, Property Yield

Relative Valuation

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

Author's Opinion

Favorable	Less Favorable
High Occupancy	Low REIT Sponsor's Shareholding
Long WALE	Low REIT Manager's Shareholding
Low Cost of Debt	Low Directors of REIT Manager's Shareholding
100% Unsecured Debt	Short Weighted Average Land Lease Expiry
Long WADM	Concentrated Debt Maturity
High Interest Coverage Ratio	High Top Tenant & Top 10 Tenants' Contributions
Low Top Property & Top 5 Properties' Contributions	Interest Coverage Ratio Downtrend
High Property Yield	Property Yield Downtrend
High Distribution on Capital
High Distribution Margin
DPU Uptrend
NAV per Unit Uptrend
Occupancy Uptrend
Distribution Margin Uptrend

KDC has maintained its performance from the prior quarter, displaying its resilient fundamentals. In an effort to manage the rising electricity expenses, KDC has secured fixed tariffs for its colocation properties in Singapore and Australia, ensuring cost stability for 2 years starting January 2023 and November 2022 to December 2023 respectively. Additionally, more than 90% of electricity costs are passed through to colocation clients.

For more information, check out:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and details of Singapore REIT

REIT Review - List of previous REIT review posts

To support my work, join:

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

REIT-TIREMENT Patreon - Support my work and get exclusive content

REIT-TIREMENT Facebook Page - Support by liking my Facebook Page    

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

*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.