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Keppel DC REIT’s distributable income reached S$14.74 million in Q1 2016, surpassing the forecast made during its initial public offering (IPO) by 1 percent. It is also 3.8 percent higher than the S$14.21 million recorded a year ago.
“Distributable income was higher mainly due to realised gains on settlement of foreign exchange forward contracts, higher finance income, the contribution from Intellicentre 2, lower finance costs, property-related and other expenses, as well as current tax expenses,” said its manager Keppel DC REIT Management Pte Ltd in an SGX filing.
But this was partially offset by lower revenue due to a client downsizing its requirements in Citadel 100 Data Centre, as well as lower power revenue and higher property-related costs for its Singapore Properties. The depreciation of the euro, Malaysian ringgit, and the Australian dollar also had a negative impact as well.
The REIT’s revenue also dipped by 4.5 percent to S$24.77 million compared to S$25.93 million during Q1 2015, while net property income slid by 2.5 percent to S$21.19 million from S$21.73 million.
Nevertheless, distribution per unit (DPU) rose by 3.7 percent from 1.61 cents in Q1 2015 to 1.67 cents during the first quarter, which was in line with Credit Suisse’s expectations.
However, the financial institution revealed that Keppel DC REIT’s occupancy rate slid by 2.8 percentage points on quarter to 92 percent in Q1 2016 as a tenant downsized at Citadel 100.
Nonetheless, the Weighted Average Lease Expiry (WALE) remained stable at 8.7 years, while 8.2 percent and 23.9 percent of the REIT’s net leasable area (NLA) are expected to expire in 2016 and 2017 respectively, mostly from the Singapore assets and Basis Bay in Malaysia.
Keppel DC REIT’s balance sheet also remains healthy with an aggregate leverage of 29.6 percent as of end-March. At the same time, its shares were valued at S$1.06 apiece, representing a premium of 17.5 percent to its net asset value per unit of S$0.902.
“We have an ‘outperform’ rating on the REIT and believe it has one of the most stable operations amongst the REITs with good potential for inorganic growth from acquisitions,” noted Credit Suisse.
Looking ahead, Keppel DC REIT’s prospect is expected to be good as demand for data centres would likely remain healthy despite the uncertain world economic outlook due to continuing global trends such as multi-device ownership, the proliferation of smart devices as well as the growth of cloud computing.
“According to Cisco’s Global Cloud Index 2014-2019, data centre traffic on a global scale is forecasted to see a three-fold increase from 2014 to 2019 at a compounded annual growth rate (CAGR) of 25 percent to 10.4 zettabytes,” said the REIT manager.
Furthermore, Keppel DC REIT is expected to acquire Keppel T&T’s T27 datacentre by the second or third quarter of 2016, added Credit Suisse.
Image: Keppel Datahub T25 in Singapore.
Nikki Diane De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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