SINGAPORE (Apr 17): Analysts are keeping their bullish stance on Keppel DC REIT (KDCREIT), after the group on Monday announced 1Q19 results that were in line with expectations.
KDCREIT reported distribution per unit (DPU) of 1.92 cents for the 1Q19 ended March, some 6.7% higher than DPU of 1.80 cents a year ago.
This formed 24.5% and 24% of full-year forecasts for OCBC Investment Research and CGS-CIMB Research, respectively.
The increase was driven by the acquisitions of maincubes Data Centre in Germany and Keppel DC Singapore 5 in March and June 2018, respectively.
See: Keppel DC REIT reports 6.7% rise in 1Q DPU to 1.92 cents on new acquisitions
OCBC is keeping its “buy” call on KDCREIT with a higher fair value estimate of $1.64 from $1.60 previously, while CGS-CIMB is maintaining its “add” recommendation with an unchanged target price of $1.54.
See also: Test debug host entity
The analysts note that KDCREIT had undertaken asset enhancement initiatives at three of its assets during the quarter to improve efficiency and bolster quality.
Retrofitting works at Keppel DC Singapore 3 are scheduled to be completed in mid-2019, asset enhancement works to improve energy efficiency at Keppel DC Dublin 1 look set to be completed by 2020, and power upgrading and fit-out works at Keppel DC Dublin 2 are slated to be completed in 2H19.
In addition, OCBC analyst Andy Wong Teck Ching believes KDCREIT has ample debt headroom to drive inorganic growth.
See also: Maybank downgrades ComfortDelGro in contrarian call over Addison Lee acquisition worries
“Encouragingly, management shared that its pipeline of potential acquisitions looks healthy this year, and this is underpinned by its business development activities although the market has not seen much data centre transactions in the past several months,” Wong says.
“We continue to like KDCREIT for its pure-play exposure to the growing data centre industry and its acquisition-led growth story,” says CGS-CIMB analyst Lock Mun Yee.
As at 12.28pm, units in KDCREIT are trading 1.3% down at $1.47.
According to OCBC valuations, this implies an estimated price-to-earnings (PE) ration of 18.4 times and a dividend yield of 5.3% for FY19.
