Keppel DC REIT Review @ 17 October 2023

Basic Profile & Key Statistics

• Main Sector(s): Industrial
• Country(s) with Assets: Singapore, Australia, Ireland, China, Germany, Netherlands, England, Italy, Wales & Malaysia
• No. of Properties (exclude development/associate/fund): 23

Key Indicators

Performance Highlight

Gross revenue and NPI remain similar YoY. However, distributable income and DPU have declined YoY due to higher finance costs. The decline is lower for DPU as compared to distributable income could be due to lower capex reserves being set aside or higher management fees payable in units, we will know the details in the next quarter.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median by 20% or more
• REIT Manager's Shareholding: Below median by 20% or more
• Directors of REIT Manager's Shareholding: Below median by 20% or more

Lease Profile

• Committed Occupancy: ± 5% from median
• WALE: Above median by 20% or more
• Highest Lease Expiry within 5 Years: Above median by 10% or more; Falls in 2024
• Weighted Average Land Lease Expiry: Below median by 20% or more

Debt Profile

• Gearing Ratio: ± 10% from median
• Cost of Debt: ± 10% from median
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: 100%
• WADM: Above median by 20% or more
• Highest Debt Maturity within 5 Years: Above median by 20% or more; Falls in 2027
• Interest Coverage Ratio: Above median by 20% or more

Diversification Profile

• Top Geographical Contribution: ± 10% from median
• Top Property Contribution: Below median by 20% or more
• Top 5 Properties' Contribution: Below median by 10% or more
• Top Tenant Contribution: Above median by 20% or more
• Top 10 Tenants' Contribution: Above median by 20% or more

Key Financial Metrics

• Property Yield: Above median by 20% or more
• Management Fees over Operating Distributable Income: ± 10% from median; $ 6.54 distribution for every dollar paid
• Operating Distributable Income on Capital: Above median by 20% or more
• Operating Distributable income Margin: Above median by 20% or more
• Operating Distribution Proportion: Above median by 5% or more

DPU Breakdown

• TTM DPU Breakdown
• 96.6% from Operation
• 3.2% from Management Fees Paid in Units
• 0.2% from Income Support
• TTM DPU = 95.7% of Distributable Income

Trends

• Uptrend: DPU from Operation, NAV per Unit, Committed Occupancy, Operating Distributable Income Margin
• Flat: Operating Distributable Income on Capital
• Downtrend: Interest Coverage Ratio, Property Yield

Relative Valuation

• Dividend Yield: Average for 1y, 3y & 5y
• P/NAV: Average for 1y, 3y & 5y

Author's Opinion

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

Performance is similar to the previous quarter. For debt, there is only a 4.1% maturity in the coming 1 year. Together with a 72% fixed rate debt, further increase in interest costs is expected to be minimal. In addition, the manager has substantially hedged the forecasted foreign-sourced distributions till the end of June 2024 and progressively hedged part of foreign-sourced distributions till the end of December 2024. 

As for Guangdong Data Centre 3, it is expected to be fully fitted by the end of this year, which has been delayed from 3Q 2023. After which, it would be leased to a master lease client on a fully-fitted, triple-net basis for 15 years.

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

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*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 findings and should not be considered 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.