Keppel DC REIT records 27.5% YoY rise in H2 2020 DPU

Analysts are divided on the trust’s growth prospect.

Keppel DC REIT has reported a distribution per unit (DPU) of 4.795 cents for H2 2020, 27.5% higher YoY than the previous year, which brings the FY2020 DPU to 9.17 cents, 20.5% higher YoY than in FY2019.

The company’s gross revenue and net property income for 2H 2020 jumped 42.6% and 43.1% YoY to $141.6m and $129.9m, respectively.

Distributable income for the same period went up by 39.1% YoY to $81.9m, pushing its distributable income for FY 2020 to $156.9m, a 38.6% YoY increase from FY2019.

With the company’s latest results and outlook, analysts are at a divide over Keppel DC REIT’s growth.

Maybank Kim Eng analyst Chua Su Tye gave a “sell” rating for Keppel DC REIT, citing that the trust’s growth is “unexciting versus peers”, with the 12-month target price at $0.90.

“We continue to see headwinds for leasing out vacancies and at pressured rents. This is especially in the coming quarters as firms reassess options post-COVID. We anticipate further downsizing by financial institution tenants,” Chua said.

Chua added that rents have moderated and its outlook remains challenging given uncertainties in office demand amidst the macro downturn and work from home entrenchment.

On the other hand, OCBC Investment Research rated Keppel DC REIT with a “buy” recommendation, with a higher fair value estimate of $3.51. Their analysts said the REIT’s FY2020 results came in within their expectations, which accounted for 101.2% of its forecast.

“Keppel DC REIT is a strong proxy to growing demand for data centre space, underpinned by increasing digitalisation and cloud adoption trends,” OCBC analysts said.

They added that it is also one of the most defensive REITs, given its long portfolio weighted average lease to expiry of approximately 6.8 years.

Meanwhile, Keppel DC REIT said that whilst the resilience and rapid growth of the data centre market have attracted more competition for assets and capital, the barriers of entry for the data centre sector remain high, especially for quality colocation assets.

“The Manager’s track record coupled with the ability to leverage the Keppel ecosystem in providing end-to-end solutions, from project development to facilities management to client networking, have ensured that Keppel DC REIT is well-positioned to benefit from the growth of the data centre market,” the manager said.