Analyst Dale Lai from DBS maintained a Buy rating on Keppel DC REIT (KPDCF – Research Report) and keeping the price target at S$2.20.
Dale Lai has given his Buy rating due to a combination of factors that outline Keppel DC REIT’s (KDCREIT) strong positioning in the data center real estate market. His analysis highlights the REIT’s focused investment strategy on a diversified portfolio of high-quality data centers situated in strategic locations across Asia Pacific and Europe. The REIT’s assets, valued at S$3.1 billion and spanning multiple cities and countries, are fundamentally supported by the growing demand for data centers, which is a structural trend benefiting the sector.
Moreover, Lai emphasizes the REIT’s past accretive acquisitions and asset enhancement initiatives (AEIs) as key drivers for future earnings growth, suggesting that there is potential for further organic growth. Despite a slower pace in acquisitions due to lower capitalization rates and increased financing costs, he anticipates a possible resumption of such growth initiatives given a stabilization in interest rates. His confidence in the REIT’s ability to continue expanding its portfolio, along with an expectation of resolution to current rental default issues, underpins the Buy recommendation, even with a revised target price.
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Keppel DC REIT (KPDCF) Company Description:
Keppel DC REIT is a pure-play data-center REIT company. The company’s strategy is to invest, directly or indirectly, in a diversified portfolio of income-producing real estate assets. Most of its operations take place in Asia-Pacific and in Europe. The fund is managed by Keppel DC REIT Management. The fund’s largest source of revenue is gross rental income. The fund’s data-center properties include Keppel DC Singapore 1, Keppel DC Singapore 2, and a 90% interest in Keppel DC Singapore 3, among others. In Europe, the fund notably owns GV7 Data Center in London, Keppel DC Dublin 1, and Almere Data Center in Almere, the Netherlands.
