Keppel DC Reit’s H2 DPU up 4.8% to S$0.05165

DATA centre-focused Keppel Data Centre (DC) Reit on Tuesday (Jan 31) posted a 4.8 per cent increase in distribution per unit (DPU) to S$0.05165 for the second half ended Dec 31, 2022, from S$0.04927 in the corresponding period a year ago.

Gross revenue was up 4.3 per cent to S$141.8 million for the half-year period, from S$135.9 million a year ago. Net property income (NPI) grew 4 per cent on the year to S$129.3 million for the half year, from S$124.3 million. Distributable income rose 7.3 per cent year on year to S$93.7 million, from S$87.4 million.

In a bourse filing, the real estate investment trust’s (Reit) manager said that the growth in distributable income was mainly due to a number of contributions: from the accretive acquisition of London Data Centre; Guangdong Data Centres 1, 2 and 3; the investment in bonds issued by M1 Network; the contributions from post asset enhancement initiatives at DC1 and the Dublin assets; as well as the completion of Intellicentre 3 East Data Centre.

A distribution of S$0.05165 per unit for the period Jul 1 to Dec 31, 2022 will be paid on Mar 14 after the record date of Feb 8.

For the full year, gross revenue was up 2.3 per cent to S$277.3 million.

NPI was up 1.8 per cent to S$252.5 million, while distributable income was up 7.7 per cent to S$184.9 million.

Meanwhile, full-year DPU rose 3.7 per cent to S$0.10214.

Its manager described Keppel DC Reit’s portfolio performance as “resilient”, and said that this was driven by the addition of “quality assets and active asset management”, noting the acquisitions of London Data Centre and Guangdong Data Centres 2 and 3 in 2022.

As at Dec 31, 2022, Keppel DC Reit had approximately S$3.7 billion of assets under management, up from S$3.4 billion as at end-2021.

The Reit’s portfolio occupancy stood at 98.5 per cent with a long portfolio weighted average lease expiry of 8.4 years as at Dec 31, 2022.

This was mainly attributable to newly acquired assets with remaining lease tenures ranging from 15 to 17 years, as well as the manager’s “continued proactive asset management efforts”, its manager said. Keppel DC Reit has also secured an offer to extend the remaining land tenure of Keppel DC Singapore for a further term of nine years.

On top of that, its manager added, it had secured new, renewal or expansion contracts at its data centres in Singapore, Malaysia, Australia and Ireland in 2022, which have helped to defray higher costs. The impact of inflation was also mitigated by “the positive income reversions and built-in income and rental escalations”, it said.

Anthea Lee, chief executive officer of the manager of Keppel DC Reit, said she remained “cautiously optimistic in terms of growth opportunities” despite rising interest rates.

“There are still opportunities in the market that we are evaluating currently, but we maintain that disciplined approach in approaching growth and acquisition opportunities,” Lee said in a briefing accompanying the results announcement.

The Reit manager noted that it will “continue to drive growth in its diversified global portfolio of data centres by strengthening its income resilience through acquisitions”.

“But we remain very cautiously optimistic because I think that it is important to be looking out for long-term sustainability of the income rather than just to look at short term asset under management growth,” Lee added.

Amid concerns over possible headwinds due to a potential recession and slowdown in corporate spending, Lee said the Reit manager has not yet witnessed any reduction in demand for data centres in key markets.

“Keppel DC Reit is well-placed to capture opportunities from the positive industry trends. Market watchers have forecast strong continued growth of the colocation market driven by demand from large cloud and Internet companies as well as limited supply of data centres in key data centre markets,” she noted.

Units of Keppel DC Reit closed at S$2.04, down S$0.04 or 1.9 per cent on Tuesday, before the results release.