Digital Core REIT DPU falls 6.3% in 1H24 - Our Quick Take

Summary of Digital Core REIT's 1H24 results

Digital Core REIT reported its results and dividends for the first half of 2024 (1H24).

• Digital Core REIT 1H24 DPU fell 6.3% year-on-year to 1.80 US cents, of which 0.48 US cents was paid in April 2024 as an Advanced Distribution. 

• This translates to an annualized distribution yield of 5.8%.

  

Revenue fell 9.6% and NPI declined 13.4%, due to the sale of two Silicon Valley assets in Jan 2024. It also acquired a further 24.9% stake in the Frankfurt asset and an incremental 10% in Osaka asset.

The asset sale and a private placement in April 2024 helped to lower gearing to 34.4% (Mar 24: 35.1%). 

Therefore, finance expense was flat even as interest rate rose to 4.1% in 2Q24 (1Q24: 3.9%). There is no significant debt refinancing requirement till 2026.

About 25% and 33% of leases by net rentable space are expiring in 2024 and 2025. And DigiCore would need to incur capex before a new lease commence. 

Management remains confident of demand in the US, as supply is curtailed by energy and utility infrastructure. 

Data centre demand remains soft in Toronto, where occupancy drifted lower to 65.6% in Jun, from 66.8% in Mar.

Beansprout's take on Digital Core REIT's 1H24 results

The earnings are likely to be seen as neutral by investors. 

Digital Core REIT's revenue may dip when the lease transition take place at the Los Angeles assets on 1 Oct 2024. 

Distributable income may be impacted with about US$10m in planned capex spend on this asset.  

Management appears sanguine about backfilling of the expiring space at North Virginia and Silicon Valley. Investors are likely to focus on its progress to renew/secure new leases.

Digital Core REIT is currently trading at 0.9x price to book, and is expected to offer a dividend yield of 5.8%.

Dive deeper into the Digital Core REIT with our checklist and find out if it may be worthwhile adding the REIT to your watchlist. 

To learn more about our outlook on Singapore REITs, read our detailed report on "Singapore REITs - Distributions may remain under pressure"

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Related links:

• Digital Core REIT share price and share price target
• Digital Core REIT dividend forecast and dividend history

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