Keppel DC REIT

Keppel DC REIT: 3Q15 beats forecasts on FX gains and new data centre

The data centre-focused REIT posted 3Q15 DPU and distributable income of 1.64¢ and $14.5m, roundly beating management’s forecasts by 2.5% and 2.2% respectively.

Gross revenue also surpassed forecast by 1.8% at $25.7m with the gains largely due to:
1) maiden contribution from recently acquired Intellicentre 2
2) higher variable rental income from its Singapore properties
3) a jump in other income to $0.5m on the back of power-related revenue and ad hoc service fees charged at Gore Hill and Citadel data centres.

The gains were partially offset by lower rental income in Europe, Australia, and Malaysia due to the depreciation of foreign currencies against the SGD.

Net property income was marginally lower than forecasts at $21.4m (-0.3%) due to higher operating expenses arising from facility management costs for its SIngapore properties and Gore Hill asset, higher property taxes as well as repair and maintenance costs incurred.

Bottom line was buttressed by a FX gains on foreign borrowings and forward contracts as well as 39.1% drop in tax expenses to $0.6m.

Portfolio occupancy edged up to 95.1% (+1.1ppt q/q) with seven out of nine assets at full occupancy. Meanwhile, the weighted average lease-to-expiry was extended to 8.9 years, boosted by a 20-year triple-net lease that came on the back of the acquisition of Intellicentre 2.

Aggregate leverage grew slightly to 30.1% in light of the Intellicentre 2 acquisition with a debt tenor of 3.4% and average cost of debt of 2.5%.

Keppel DC REIT is currently trading at an annualised yield of 7%, and 1.2x P/B. The street has 5 Buys and 1 Hold rating on the counter with a consensus TP of $1.12.

Latest broker ratings:
OCBC maintains Buy with a TP of $1.24
Credit Suisse maintains Outperform with a TP of $1.16