Company Coverage
NTT DC REIT (NTTDCR SP): 1QFY27: A Journey Of A Thousand Miles Begins With A Single Step
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
US$0.95
US$1.31
+37.9%
US$1.43
Analyst
Highlights
Portfolio occupancy would have increased 3.3ppt to 99.2% if we include committed leases that have yet to commence. Majority of these new leases are expected to contribute to revenue starting 3QFY27.
NTTDCR has debt headroom of US$261m based on gearing of 40%, which could be utilised to acquire a hyperscale 24MW DC in Frankfurt, Germany.
Maintain BUY with target price at US$1.31. We raised our weighted risk-free rate based on geographical disposition from 3.6% to 4.1% due to the recent increase in government bond yields.
Analysis
- NTT DC REIT (NTTDCR) provided a business update for 1QFY27.
- Outperformed IPO projection in 1Q FY26/27. NTTDCR continued to exceed its IPO forecast, with NPI rising 5.0% above projections to US$27.9m and distributable income surpassing forecasts by 10.6% to US$22.6m in 1QFY27. The strong performance was driven by lower real estate taxes, lower operating expenses and reduced financing costs.
- Leasing momentum supports occupancy growth. Portfolio occupancy by IT load improved 0.8ppt qoq to 95.9% as of Jun 26, driven by expansion leases secured at CA1, CA3 and SG1. Including committed leases that have yet to commence, occupancy would have increased 3.3ppt to 99.2%. Management highlighted that the bulk of committed leases previously secured are expected to commence revenue contribution starting 3QFY27 onwards, providing a further earnings uplift in the upcoming quarters.
- Renewed the master services agreement with NTT Singapore at SG1. NTTDCR secured lease renewals representing monthly base rent of US$718,000 at a positive rental reversion of 13.4% in 1QFY27, largely driven by the 23% rental uplift from renewal of NTT Master Services Agreement at SG1. NTTDCR also backfilled 0.3MW at SG1 at 7% positive rental reversion with phased commencement from 3QFY27.
Highlights
Portfolio occupancy would have increased 3.3ppt to 99.2% if we include committed leases that have yet to commence. Majority of these new leases are expected to contribute to revenue starting 3QFY27.
NTTDCR has debt headroom of US$261m based on gearing of 40%, which could be utilised to acquire a hyperscale 24MW DC in Frankfurt, Germany.
Maintain BUY with target price at US$1.31. We raised our weighted risk-free rate based on geographical disposition from 3.6% to 4.1% due to the recent increase in government bond yields.
Analysis
- NTT DC REIT (NTTDCR) provided a business update for 1QFY27.
- Outperformed IPO projection in 1Q FY26/27. NTTDCR continued to exceed its IPO forecast, with NPI rising 5.0% above projections to US$27.9m and distributable income surpassing forecasts by 10.6% to US$22.6m in 1QFY27. The strong performance was driven by lower real estate taxes, lower operating expenses and reduced financing costs.
- Leasing momentum supports occupancy growth. Portfolio occupancy by IT load improved 0.8ppt qoq to 95.9% as of Jun 26, driven by expansion leases secured at CA1, CA3 and SG1. Including committed leases that have yet to commence, occupancy would have increased 3.3ppt to 99.2%. Management highlighted that the bulk of committed leases previously secured are expected to commence revenue contribution starting 3QFY27 onwards, providing a further earnings uplift in the upcoming quarters.
- Renewed the master services agreement with NTT Singapore at SG1. NTTDCR secured lease renewals representing monthly base rent of US$718,000 at a positive rental reversion of 13.4% in 1QFY27, largely driven by the 23% rental uplift from renewal of NTT Master Services Agreement at SG1. NTTDCR also backfilled 0.3MW at SG1 at 7% positive rental reversion with phased commencement from 3QFY27.
BUY (Maintained)
Current price:
Target price:
Upside:
Previous TP :
US$0.95
US$1.31
+37.9%
US$1.43
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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