SINGAPORE (Sept 26): CIMB is upgrading its call on Keppel DC REIT (KDCREIT) to “add” from “hold” previously, with an increased target price of $1.36.
In a Monday report, analyst Yeo Zhi Bin and Lock Mun Yee believe that the market has not fully reflected the trust’s latest acquisition of B10 data centre (DC) in Ireland.
See: Keppel DC REIT acquires second Dublin data centre for $101.3 mil
The acquisition was completed on Sept 13 for a consideration of €66 million ($101.3 million), about 2% discount to the independent valuation.
The cash consideration is €58.5 million, considering factors such as €1 million client racks expansion amount, which is a form of income top-up, implying that the vacancy in B10, which is currently at 12.7%, could be filled.
There could be an asset enhancement initiative (AEI) if B10 were to receive additional power of 2.0MVA by end-2018.
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Including the B10 DC, KDCREIT’s assets under management (AUM) increased to $1.53 billion.
“We believe that sponsor’s Almere 2 in Netherlands is ready for injection by 2018 (estimated price tag of about $140 million),” says Yeo and Lock.
Including Almere 2 and the forward purchase of maincubes, KDCREIT’s AUM would stand at $1.8 billion.
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The analysts note that the trust has two other buying opportunities but these assets will not stabilise by 2018.
“Despite the accretive acquisition, we note that KDCREIT’s unit price has remained largely range bound. We turn constructive and expect KDCREIT’s hitherto inorganic expansion to drive a 3-year DPU CAGR of 8% through FY19F,” says the analysts.
As at 12.25pm, units in KDCREIT are trading 2 cents higher at $1.32 or 1.38 times FY17 book value with a dividend yield of 5.68%.
