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Hot Stock: Keppel DC Reit most active Singapore Reit, gets outperform call from Credit Suisse

Thursday, January 15, 2015 - 11:23
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RECENTLY-LISTED Keppel DC Reit is the most actively traded Reit in Singapore on Thursday, with more than eight million units changing hands.

By 10.50 am, the pure data centre Reit is trading around S$0.975 a unit, up 0.5 cent, or 0.5 per cent.

Earlier this week, Credit Suisse initiated coverage on the Reit with an outperform call and a target price of S$1.10 a unit.

"Keppel DC Reit currently trades on 6.6 per cent FY15E yield, and we believe there may be future upside from incremental acquisitions,'' research analysts at Credit Suisse said.

They noted that the Reit offers the first of its kind in Asia as a pure-play data centre Reit. Keppel DC Reit consists of eight data centres: two each in Singapore and Australia, and one each in Malaysia, the UK, the Netherlands and Ireland, with an aggregate lettable area of 509,913 sq ft and an S$1.022 billion appraised value. It is also seen as a proxy to growing data usage and demand for data centres.

"Keppel DC Reit provides a unique exposure to the favourable industry fundamentals of the data centre market, which is still in its growth phase,'' Credit Suisse said.

Demand is expected to continue its upward trajectory with growing data creation and storage needs, as well as the pick-up in outsourcing of data centre requirements, cloud computing and compliance/regulatory requirements on data security.

"Meanwhile, supply outlook looks supportive of rental growth given the limitations like high barriers to entry,'' it added.

The high visibility of Keppel DC Reit's rental income stream also makes it a defensive play.

SGX-listed Keppel Telecommunications & Transport Ltd is the sponsor of Keppel DC Reit and is primarily involved in two businesses, logistics and data centres, with operations in Asia-Pacific and Europe.

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