SINGAPORE (Sept 14): DBS is maintaining its “buy” call on Keppel DC REIT with a higher target price of $1.44.
This follows the group’s acquisition of Dataplex, its second co-location data centre in Dublin, Ireland for €66 million ($101.3 million).
See: Keppel DC REIT acquires second Dublin data centre for $101.3 mil
The acquisition started operations in 2013 and has 25,200sf of net leasable area (NLA).
With the addition of the Dataplex, assets under management has increased to about $1.53 billion with aggregate NLA of 917,240 sf across 13 data centres, excluding maincubes.
In a Thursday report, DBS says, “We estimate the NPI yield of the new asset to be 7.5% and contributions to be immediately accretive to DPU. FY18F DPU is projected to be lifted by 5.5% to 7.72 cents, representing a yield of 5.9% based on the current price.”
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However, Lim & Tan Securities is maintaining its “hold” recommendation despite the latest acquisition.
In a separate report, Lim & Tan Securities says, “Even after the acquisition, Keppel DC REIT’s aggregate leverage of 32.4% is still comfortably below the regulatory limit of 45.0%, putting them in a reasonable position to do more accretive acquisitions going forward.”
Lim & Tan Securities estimate the NPI yield of the asset to be around 7% to 8%, which is expected to lift consensus DPU for FY18 by about 6% to 7.74 cents, representing a DPU growth of 7.5% from FY17 and a forward yield of 6%.
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The management believes that this asset is a strategic addition to its portfolio as it has as strong tenant profile with a long weighted average lease expiry (WALE) of 11.01 years that provides income stability.
In addition, about 87.3% of the data centre is leased to leading global internet enterprise, IT services and telecommunication clients.
Apart from enhancing its offering in a key data centre hub, the REIT is also able to reap operational synergies from its existing data centre, Keppel DC Dublin 1.
The acquisition is immediately accretive to the REIT’s DPU and will further diversify its income stream, while portfolio WALE remains long at about 9.4 years.
The acquisition has been completed on the same day and is funded by debt.
As at 10.29am, units in Keppel DC REIT are trading at $1.30 or 1.84 times 2017 forward earnings with a distribution yield of 5.5%.
