Bullish data centre industry could boost Keppel DC REIT
Its total assets under management could have already hit $1.7b.
Keppel DC REIT could be a beneficiary of the bullish outlook for the data centre industry in the Asia Pacific region, OCBC Investment Research revealed.
It said in its report that the revenue for the APAC data centre market is projected to double from US$16b this year to US$32b by 2022 and that Singapore is a key data centre hub in the region.
Encouragingly, supply pressures are easing. Based on a CBRE report, the new supply entering the Singapore market over the next 24 months is expected to be more moderate as compared to the past two years.
OCBC analyst Wong Teck Ching Andy said, "We expect demand to remain robust, underpinned by secular growth trends such as cloud computing, e-commerce and big data requirements, and supported by Singapore’s infrastructure and Smart Nation initiatives."
Keppel DC REIT's most recent acquisition was the B10 Data Centre in Dublin, Ireland for $105.09m (€66m). Including this and the firm's data centre in Germany, its total assets under management (AUM) could now reach $1.7b, which is near its 2018 target.
OCBC said should the firm finance $200m worth of acquisitions in 2018 using a debt-to-equity mix of 25% to 7%%, distribution per unit (DPU) growth could hit 2.9%.
Here's more from OCBC Investment Research:
This is based on the following assumptions: NPI yield of 7.5%; cost of debt of 2.5%; effective tax rate of 15%; new unit issuance price of $1.33; acquisition fees payable in units. Gearing ratio would be 35.8%.
Factoring in the Dublin acquisition and adjusting our cost of equity assumption downwards from 8.1% to 7.8%, we raise our FY18F DPU forecast by 2.6% and bump up our fair value estimate from $1.39 to $1.50.
Although FY18F P/B ratio of 1.47x may appear steep, this still compares favourably to other global listed data centre REITs (~2.4x – 5.7x forward P/B), and comes in at only a slight premium to Mapletree Industrial Trust (1.41x FY18F P/B), which owns more traditional industrial assets.
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