SINGAPORE (July 18): The downsizing of leased space by Keppel DC REIT’s tenant at Basis Bay Data Centre in Malaysia cuts occupancy at the property to 63.1%, from 100% previously. Meanwhile, portfolio occupancy slipped 2 percentage points q-o-q to 93.1%.
But OCBC Investment Research believes this “disappointing development” would barely put a dent in KDCREIT’s net property income (NPI) and distribution per unit (DPU).
“Our previous forecasts assume that Basis Bay Data Centre would contribute only 2.8% of our overall FY17 NPI projection,” says lead analyst Andy Wong Teck Ching in a Tuesday report.
Factoring in the lower occupancy rates, OCBC has trimmed its FY17/FY18F NPI and DPU projections marginally by 0.7% and 0.9%, respectively.
The research house is keeping its “buy” call on KDCREIT with an unchanged fair value estimate of $1.39.
Wong notes that KDCREIT has already secured agreement in-principle for two of the three major overseas leases which were expiring for the remainder of the year.
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The tenant at Basis Bay is understood to have decided to downsize on its leased space as it had been utilising only two out of the three floors it was leasing from KDCREIT previously. It will continue to lease the two remaining data centre floors for another five years.
“We conservatively assume that a replacement tenant would only begin contribution to KDCREIT in 2H18,” says Wong. “Notwithstanding this disappointing development, we do not expect a significant impact to KDCREIT’s financials.”
Keppel DC REIT on Monday posted a 4.2% increase in DPU of 1.74 cents for the second quarter ended June, from DPU of 1.67 cents a year ago.
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Gross revenue and NPI surged 38.8% y-o-y and 41.9% y-o-y to $34.5 million and $31.4 million, respectively.
The strong results were driven by contributions from the acquisitions of Milan DC, Cardiff DC, and a 90.0% interest in Keppel DC Singapore 3 (KDC SGP 3).
See: Keppel DC REIT 2Q DPU up 4.2% to 1.74 cents
As at 12.26pm, units of Keppel DC REIT are trading half a cent lower at $1.32.
