Company Coverage
Keppel DC REIT (KDCREIT SP): Building Scale In Hyperscale DCs
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
S$2.17
S$2.99
+37.8%
S$2.95
Analyst
Highlights
- KDCREIT is acquiring two freehold, hyperscale fully fitted (colocation) data centres (DC) located in Inzai City, Greater Tokyo, Japan. The two DCs are 100% occupied and provide an attractive built-in contractual rental escalation of 2.8%. Management estimated the acquisition to be accretive by 2.6%.
- KDCREIT continues to build scale in hyperscale DCs. Potential acquisitions from sponsor pipeline, such as SGP9 in Singapore and a DC in Western Tokyo, are likely to materialise in 2028.
- KDCREIT has a resilient Singapore-centric portfolio and is well supported by sponsor Keppel. Maintain BUY. Target price: S$2.99.
Analysis
- Continuation of pivot towards hyperscale DCs. Keppel DC REIT (KDCREIT) has entered into agreement to acquire 88.6% effective interest in Tokyo Data Centre 4 and Tokyo Data Centre 5, two freehold, hyperscale fully fitted (colocation) DCs located in Inzai City, Greater Tokyo, Japan. The two DCs provide NPI yield of 4-5%, compared with other comparable transactions at low-4%. The aggregate purchase consideration (100% basis) of JPY190.0b (S$1,548.5m) represents a 2.1% discount to the latest assets’ valuation.
- Benefitting from built-in contractual rental escalation of 2.8%. The two DCs are 100% occupied by four investment grade internet enterprise and IT services clients, of which three are new to KDCREIT. The assets benefit from a contracted average annual rental escalation of 2.8%, which is attractive for DC transactions in Japan. In-place rents are estimated to be more than 30% below prevailing market rents. KDCREIT will be able to benefit from positive rental reversion when >5% of income is due for renewal in 2028 and 2029. WALE is 4.5 years for Tokyo Data Centre 4 and 10.6 years for Tokyo Data Centre 5. Portfolio contracted power capacity utilisation will improve by 1ppt to 96%.
- Building scale in hyperscale DCs. KDCREIT’s AUM will expand by 21% to S$7.6b. The Japan portfolio will account for 23% of rental income post-acquisition, compared with 9% previously. Hyperscale tenants continue to account for 70% of KDCREIT’s rental income. KDCREIT remains well anchored in Singapore, which still accounts for 60% of rental income.
Highlights
- KDCREIT is acquiring two freehold, hyperscale fully fitted (colocation) data centres (DC) located in Inzai City, Greater Tokyo, Japan. The two DCs are 100% occupied and provide an attractive built-in contractual rental escalation of 2.8%. Management estimated the acquisition to be accretive by 2.6%.
- KDCREIT continues to build scale in hyperscale DCs. Potential acquisitions from sponsor pipeline, such as SGP9 in Singapore and a DC in Western Tokyo, are likely to materialise in 2028.
- KDCREIT has a resilient Singapore-centric portfolio and is well supported by sponsor Keppel. Maintain BUY. Target price: S$2.99.
Analysis
- Continuation of pivot towards hyperscale DCs. Keppel DC REIT (KDCREIT) has entered into agreement to acquire 88.6% effective interest in Tokyo Data Centre 4 and Tokyo Data Centre 5, two freehold, hyperscale fully fitted (colocation) DCs located in Inzai City, Greater Tokyo, Japan. The two DCs provide NPI yield of 4-5%, compared with other comparable transactions at low-4%. The aggregate purchase consideration (100% basis) of JPY190.0b (S$1,548.5m) represents a 2.1% discount to the latest assets’ valuation.
- Benefitting from built-in contractual rental escalation of 2.8%. The two DCs are 100% occupied by four investment grade internet enterprise and IT services clients, of which three are new to KDCREIT. The assets benefit from a contracted average annual rental escalation of 2.8%, which is attractive for DC transactions in Japan. In-place rents are estimated to be more than 30% below prevailing market rents. KDCREIT will be able to benefit from positive rental reversion when >5% of income is due for renewal in 2028 and 2029. WALE is 4.5 years for Tokyo Data Centre 4 and 10.6 years for Tokyo Data Centre 5. Portfolio contracted power capacity utilisation will improve by 1ppt to 96%.
- Building scale in hyperscale DCs. KDCREIT’s AUM will expand by 21% to S$7.6b. The Japan portfolio will account for 23% of rental income post-acquisition, compared with 9% previously. Hyperscale tenants continue to account for 70% of KDCREIT’s rental income. KDCREIT remains well anchored in Singapore, which still accounts for 60% of rental income.
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
S$2.17
S$2.99
+37.8%
S$2.95
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at the following link: this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
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