Keppel DC REIT

Ticker Symbol: AJBU.SI
Market Capitalization: S$940 million (as at 3rd Jul 2015)
Total Assets: S$1.1 billion (as a 31 Mar 2015)
Net Asset Value: S$0.87 (as at 31 Mar 2015)
Industry: REIT

Company background

Keppel DC REIT is the first data centre REIT listed in Asia and SGX on 12 Dec 2014. The REIT is currently managed by Keppel DC REIT Management Ltd, a wholly-owned subsidiary of Keppel T&T (the Sponsor of the REIT). Keppel DC REIT is established with the investment objective of investing primarily with a diversified portfolio of data-centre related assets.

Since the REIT IPO listing (See how to read an IPO prospectus), Keppel DC REIT has a total of 8 high-quality property assets spread across various geographical locations including Singapore, Malaysia, Australia and the United Kingdom. As at 31 Mar 2015, the carrying value of these assets is around S$989 million with a total lettable area of 509,913 sqft. 5 of the 8 property assets have leasehold periods of around 30 years while the remaining 3 are freehold. These assets have an average occupancy rate of 94%.

Opportunities

The proliferation in the “Internet of Things” have increased the number of global internet users, with growth in file sharing, file storage, e-commerce businesses and social media platforms driving data creation. Organizations face increasing complexity in operating in-house data logistics facilities and would rather have their data logistics outsourced to third-party data centre providers such as Keppel DC REIT. In Asia, the proportion of outsourced data centre space is expected to increase from 16% in 2014 to 38.5% in 2018. Moreover, with the large capital outlay to acquire property assets, set up IT infrastructure and have significant technical know-how, such data logistics create a high barrier to entry for smaller entrants who wish to compete in the data storage market.

Key Risks

Competition in the data centre industry remains high despite having a high barrier to entry, as characterized by a large number of owners, operated and developers of data centre property asset which are similar to Keppel DC REIT’s data centres. With the growing supply of data centre space, rental rates may decline with competitors offering more favorable pricing terms in order to remain competitive.

Financial Statements
Source: Capital IQ
Source: Capital IQ

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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.

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