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Keppel DC REIT reports 5% increase in 3QFY2022 DPU of 2.585 cents

Felicia Tan
Felicia Tan • 3 min read
Keppel DC REIT reports 5% increase in 3QFY2022 DPU of 2.585 cents
Guangdong DC, one of the data centres under the REIT's portfolio. Photo: Keppel DC REIT
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Keppel DC REIT has reported a distribution per unit (DPU) of 2.585 cents for the 3QFY2022 ended Sept 30, 5.0% higher than the DPU of 2.462 cents in the corresponding period the year before.

Distributable income for the quarter increased by 9.0% y-o-y to $46.9 million.

The higher DPU and distributable income were mainly attributable to contributions from the REIT’s acquisitions of Guangdong Data Centre 1, 2 & 3, the London data centre and Eindhoven Campus.

Asset enhancement initiatives (AEIs), renewals and income escalations as well as the completion of Intellicentre 3 East Data Centre also contributed to the higher DPU and distributable income.

In the 9MFY2022, DPU stood 3.4% higher y-o-y at 7.634 cents while distributable income stood 8.5% higher y-o-y at $138.1 million.

Gross revenue for the 3QFY2022 increased by 1.4% y-o-y to $70.3 million. The increase in gross revenue was partly offset by net lower contributions from some of the Singapore colocation assets, the depreciation of the Euro, Australian dollar (AUD) and British pound (GBP) against the Singapore dollar (SGD), as well as the divestment of iseek Data Centre.

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Property expenses for the quarter increased by 12.1% y-o-y to $6.2 million due to higher property-related expenses at the Dublin assets following the AEI completion.

As a result, net property income (NPI) for the 3QFY2022 increased by 0.5% y-o-y to $64.1 million.

Finance income for the quarter surged by 268.4 times to $2.4 million from $9,000 in the 3QFY2021. This was mainly due to the interest income from NetCo Bonds and coupon income from Guangdong Data Centre 3.

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Gross revenue for the 9MFY2022 increased by 0.7% y-o-y to $205.9 million while property expenses increased by 9.9% y-o-y to $18.5 million.

NPI for the 9MFY2022 consequently dipped 0.2% y-o-y to $187.3 million.

In its business update, Keppel DC REIT highlighted that it will see minimal impact from the rising electricity costs and inflation as it is on fixed electricity tariffs for its Singapore colocation assets for two years from January 2023.

According to the REIT, significantly above 90% of electricity costs are passed through to its colocation clients while its master lease clients contract electricity directly with the power suppliers.

The impact of inflation will be partially offset by renewals and income escalations, says the REIT.

On the rising interest rate environment, the REIT says its interest exposures are managed with 74% of its loans at fixed rates.

On the impact of foreign exchange (forex) volatility, the REIT’s forecast foreign sourced distributions substantially hedged till end 2023. Its “natural hedge strategy” helps to mitigate impact of forex volatility on overseas investments, it says.

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As at Sept 30, the REIT’s aggregate leverage stood at 37.5%, 220 basis points (bps) higher q-o-q. According to the REIT, the q-o-q increase was due to the financing of the acquisition of Guangdong Data Centre 2. The REIT’s interest coverage ratio is at 8.5 times as at Sept 30, down 0.7 times from the quarter before.

As at Sept 30, the REIT’s portfolio occupancy stood at 98.6% with a weighted average lease expiry (WALE) of 8.7 years by net lettable area (NLA).

According to the REIT, there is continued demand for quality data centres as the world’s data needs continue to grow exponentially.

It adds that the Asia Pacific (APAC) region is set to become the world’s largest data centre region over the next decade, fuelled by demand from hyperscalers and governments.

Furthermore, tightening government regulations around sustainability leads to limits on new data centre supply while regulations on data privacy and national sovereignty creates more demand for data centres.

As at Sept 30, Keppel DC REIT’s net asset value (NAV) per unit stood at $1.34, unchanged from Dec 31, 2021.

Units in Keppel DC REIT closed 8 cents higher or 4.82% up at $1.74 on Oct 26.

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