SINGAPORE (July 18): DBS Vickers Securities and CGS-CIMB Research are maintaining their respective “buy” and “add” calls on Keppel DC REIT with target prices of $1.52 and $1.49, after the REIT’s 2Q results came in line with both research houses’ expectations.

In a Wednesday report, DBS lead analyst Derek Tan says his target price for Keppel DC REIT is the highest in the street, although his estimates remain conservative compared to consensus after pricing in the recent acquisition of a 99% interest in Kingsland Data Center (KDC SGP 5) and fund raising.

Nevertheless, Tan highlights the possibility that DBS’s numbers could be raised by a further 3% should the manager be able to achieve tax transparency status for its stake in KDC SGP 5, which he has yet to price in.

“Trading at a yield of 5.6%, Keppel DC REIT remains one of the few REITs in Singapore that can make accretive acquisitions, supported by low cost of capital. The REIT is projected to deliver a solid 3% CAGR in distributions, supported by ambitious growth plans,” notes the analyst.

Separately, CGS-CIMB analyst Lock Mun Yee says she continues to like Keppel DC REIT for its exposure to the positive fundamentals of data centres, as well as its potential for acquisitive growth.

With its recent private placement in May 2018, Lock believes the REIT’s improved gearing puts it in a good position to explore new acquisition opportunities, supported by good income visibility from its foreign-sourced distributions which are hedged until 2H19.  

“With minimal lease expiries of 1.2-4.8% annually between FY18-20F, we anticipate Keppel DC REIT’s income to remain relatively stable,” she adds.

As at 10:44am, units in Keppel DC REIT are trading 1 cent higher at $1.36 or 17.5 times FY19F P/E.