Keppel DC REIT DPU falls by 9.9%: Our Quick Take

Summary of Keppel DC REIT's 1H24 results

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

• Keppel DC REIT 1H24 distribution per unit (DPU) fell 9.9% year-on-year to 4.549 cents, compared to 5.051 cents in 1H23. 
• However, its DPU was higher compared to 4.332 cents in 2H23. 
• This translates to an annualized yield of 4.8%.

Revenue and net property income increased by 11.9% and 4.2% compared to 1H2023, as Keppel DC REIT's portfolio occupancy rate remained high at 97.5%. 

Keppel DC REIT saw healthy positive reversions and escalations across its portfolio, including strong positive reversion of more than 40% for a major renewal contract of a colocation data centre in Singapore.

In addition, Keppel DC REIT achieved higher variable rent arising from the settlement sum received relating to the dispute with DXC.

This was offset by loss allowance for the Guangdong datacentres (DCs), which impacted 1H 2024 DPU by 0.638 cents.

Keppel DC REIT's finance costs in 1H24 rose by 14% compared to the previous year, but was flat compared to 2H23. 

Gearing decreased slightly to 35.8%, from 36.3% at 1H2023, due to repayment of about S$58.5m debt for Intellicentre Campus and other EUR-denominated debt. Keppel DC REIT's interest coverage ratio remained healthy at 5.1x. 

In July 2024, Keppel DC REIT announced its its maiden foray into Japan with the acquisition of Tokyo Data Centre 1. The acquisition is expected to be accretive to its DPU by 1.1%. 

Post the completion of acquisition of Tokyo Data Centre 1, Keppel DC REIT's aggregate leverage is expected to increase to 39.2%. 

Beansprout's take on Keppel DC REIT's 1H24 results

The results are likely to be viewed as neutral by investors. 

On a positive note, distributions have recovered compared to 2H23 with the settlement sum received relating to the dispute with DXC. In addition, Keppel DC REIT saw healthy reversions which helped to support its net property income. 

However, the Guangdong datacentres continue to be a drag on its distributions. 

Keppel DC REIT currently trades at a price-to-book ratio of 1.4x, inline with its historical average. 

Its dividend yield of 4.7% is also inline with its historical average. 

Dive deeper into the Keppel DC 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:

• Keppel DC REIT share price and share price target
• Keppel DC REIT dividend forecast and dividend history

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