Keppel DC REIT will be added to the Straits Times Index on Monday, 19th October 2020. The REIT was listed in December 2014 as Asia’s first pure-play data centre REIT, with eight assets across six countries and assets under management (AUM) of approximately $1 billion. Today, the REIT’s AUM has grown significantly to approximately $2.8 billion with 18 assets in 8 countries across Asia Pacific and Europe.
The last time I looked at Keppel DC REIT was one year ago whereby I did a quick personal analysis of Keppel DC REIT. Back then, Keppel DC REIT was trading at only S$1.49 whereby I found it to be expensive. As of 16th October 2020, Keppel DC REIT was trading at S$3.04. This is twice as expensive!
Today, is it still worth buying into Keppel DC REIT? Let us take a look at its latest financial results to find out.
Financial Summary
Below is the 1H2020 financial results. Gross Revenue and Net Property Income has jumped 29.8% and 31.1% respectively. Distribution Per Unit (DPU) had also increased by 13.6% if we compare the same quarter results. If you ask me, these are very solid numbers.
| 1H2020 (S$’000) | 1H2019 (S$’000) | Change | |
| Gross Revenue | 123,950 | 95,493 | 29.8% |
| Net Property Income | 114,217 | 86,490 | 31.1% |
| Distribution Per Unit (“DPU”) (cents) | 4.375 | 3.85 | 13.6% |
Below is the FY2019 full year financial results. Gross Revenue and Net Property Income grew 11.0% and 12.4% respectively. Distribution Per Unit (DPU) had also increased by 4.0% y-o-y.
| FY2019 (S$’000) | FY2018 (S$’000) | Change | |
| Gross Revenue | 194,826 | 175,535 | 11.0% |
| Net Property Income | 177,283 | 157,673 | 12.4% |
| Distribution Per Unit (“DPU”) (cents) | 7.61 | 7.32 | 4.0% |
Debt
As of 30th June 2020, the gearing stood at 34.5%. 69% of loans are hedged with floating-to fixed interest rate swaps, with the remaining unhedged borrowings in EUR.
Current Dividend Yield
Based on the current share price of S$3.04 and FY19 full year distribution of 7.61 cents, this translate to a current dividend yield of 2.50%. The dividend yield is extremely low given that Keppel DC REIT is overvalued.
Summary
COVID-19 is a catalyst for many businesses to go digital, and some of these online behaviours are expected to continue post pandemic. As such, higher data traffic is expected as enterprises adopt cloud solutions and ensure adequacy of collaboration platforms and videoconferencing tools as well as stepped-up cybersecurity and cloud data protection.
At the current low dividend yield of 2.5%, I personally felt that it is too expensive to buy into Keppel DC REIT. The entry of Keppel DC REIT into STI might push the stock price further up, resulting in lower yield.
Perhaps those interested to own data center REITs should look at alternatives such as Mapletree Industrial Trust.