CGS-CIMB Research analyst Lock Mun Yee has maintained her “add” recommendation on Keppel DC REIT (KDC REIT) with a slightly higher target price estimate of $2.63 from $2.62 previously after the REIT announced that it will be acquiring two data centres in China on June 20.
The data centres will be purchased at a consideration of RMB1.38 billion ($297.1 million) or at a 0.6% discount to independent valuations.
Following the purchase, Lock has raised her distribution per unit (DPU) estimates by 0.7% for the FY2022, 1.57% for the FY2023 and 3.21% for the FY2024 as she factors in the contributions from the new acquisitions.
“[We also] assume a 55/45 debt/equity funding structure,” she writes.
Despite KDC REIT’s recent share price decline, Lock remains positive on the REIT’s prospects.
“We believe the longer-term demand for data centres remain intact and will underpin KDCREIT’s income resilience in the longer term,” she says.
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At its current share price, the REIT is trading at an FY2022 dividend yield of 5.3%, according to the analyst’s estimates.
A faster pace of acquisitions is a potential re-rating catalyst for the REIT while a larger-than-expected impact from higher electricity costs are downside risks.
As at 11.26am, shares in Keppel DC REIT are trading 4 cents higher or 2.09% up at $1.95.
