Keppel DC Reit share price: 3 key trading highlights from H1 2020

Here are three key trading takeaways from Keppel DC Reit's (SGX: AJBU) latest financial update.

Keppel DC Real Estate Investment Trust (REIT) (SGX: AJBU) released its first half (H1) financial results for fiscal 2020 after the market closed on Tuesday 21 July 2020.

Here are three main highlights from the data centre-focused REIT’s latest financial update.

1. Keppel DC Reit increases DPU (dividend) by 13.6%

The company saw its gross revenue increase by 29.8% year-on-year in the first half of 2020 ended 30 June 2020 to S$124 million.

Net property income grew 32.1% to S$114.2 million in H1 2020, up from S$86.5 million in H1 2019.

Property expenses increased slightly by 8.1% year-on-year to S$9.7 million.

In light of the above, the firm delivered a distributable income of S$75 million for H1 2020, 38% higher compared to H1 2019. It attributed the higher distributable income to the acquisitions of Keppel DC Singapore 4 and DC1 in the last quarter of 2019, as well as the addition of Kelsterbach Data Centre in May 2020.

Accordingly, Keppel DC REIT declared a distribution per unit (DPU) of S$0.0438 for H1 2020, 13.6% higher than H1 2019’s S$0.039.

Based on Keppel DC Reit’s closing share price of S$2.540 on 30 June 2020, the REIT’s annualised distribution yield was 3.44%.

Read more: 5 Singapore REITs to watch for the rest of 2020 - Far East Hospitality Trust, Keppel REIT, A-REIT, CapitaLand Mall Trust and Frasers Centrepoint Trust

2. Outlook: ‘well-positioned to benefit’ from data centre growth

Keppel DC Reit’s manager Keppel DC Reit Management believes that while many business sectors have been adversely hit by the Covid-19 pandemic, the technology sector continues to perform well, with widespread lockdowns encouraging the adoption of digital tools.

As such, the management believes that the data centre industry remains resilient, as it continues to support data storage and processing requirements of the digital economy.

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The company further guided that the ‘prospects for the data centre market remain robust, underpinned by strong digital trends such as rapid cloud adoption, smart technologies, big‐data analytics, and 5G deployment’.

‘Keppel DC REIT remains well‐positioned to benefit from the growth of the data centre market, supported by its established track record and enlarged portfolio of assets,’ the company stated.

‘The Manager will continue to leverage its competencies in investment, asset and capital management, and build on Keppel Group’s capabilities in project development and facilities management, to seek opportunities and strengthen its presence across key data centre hubs globally.’

3. Keppel DC Reit share price target: what’s the latest?

Following the release of its H1 report, Keppel DC Reit shares rose nearly 3% in the first 30 minutes of trading on Wednesday 22 July to a new historic high of S$2.805 per share.

IG’s market analysis show that ‘buys’ form 56% of all trades on the Keppel DC Reit counter on Wednesday. Across the week, ‘sells’ form 62% of all trades so far.

In terms of client expectations, 80% of IG client accounts with open positions in this market anticipate that the price will rise, with the remaining 20% predicting a price decline.

Meanwhile, Refinitiv data showed that the stock has received an average rating of ‘hold’ from eight brokers. Five rated it ‘hold’, two rated it a ‘buy’ and one called ‘sell’ on the stock.

The same analysts gave the stock an average 18-month share price target of S$2.511, representing a downside of 8.7% from the last traded price.

Keppel DC Reit shares are trading at S$2.74 per share as at 14:15 SGT on 22 July 2020.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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