facebookKeppel DC REIT's (SGX: AJBU) 2020 Financial Results: Strong DPU Growth of 21%

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270121_Keppel DC REIT 2020 earnings_Seedly

Keppel DC REIT's (SGX: AJBU) 2020 Financial Results: Strong DPU Growth of 21%

profileSudhan P

Keppel DC REIT (SGX: AJBU) is a data centre-focused real estate investment trust (REIT) that has been listed on the Singapore stock market since December 2014.

At the end of 2020, Keppel DC REIT’s portfolio had 19 data centres located in key data centre hubs such as Singapore, Australia and the United Kingdom.

The REIT just released a healthy set of financial results for the year ended 31 December 2020, continuing on from its past strong financial performance as highlighted in our exclusive 2021 stocks report.

Here are three important charts from the REIT’s latest earnings presentation.

Robust Performance in 2020 

This first chart shows Keppel DC REIT’s financial performance for the year.

Source: Keppel DC REIT 2020 earnings presentation

Keppel DC REIT’s gross revenue for 2020 grew 36.3% year-on-year to S$265.6 million while net property income (NPI) increased by 37.7% to S$244.2 million.

The strong performance was on the back of full-year contributions from Keppel DC Singapore 4 and DC1 as well as new acquisitions in Europe.

Keppel DC Singapore 4 and DC1 were acquired in the fourth quarter of 2019.

With the strong top-line performance, distributable income improved by around 39% and distribution per unit (DPU) increased by 21% to 9.17 Singapore cents.

Based on the closing price of S$2.81 at the end of 2020, Keppel DC REIT’s distribution yield stood at 3.3%.

Right now, Keppel DC REIT units are changing hands at S$2.93 each, translating to a lowered yield of 3.1%.

Balance Sheet Remains Healthy

The next chart highlights Keppel DC REIT’s balance sheet strength.

Source: Keppel DC REIT 2020 earnings presentation

Keppel DC REIT, as of December 2020, had a gearing ratio of 36.2%.

The ratio increased from 30.7% at the end of 2019 due to higher gross borrowings and deferred payment.

However, the latest ratio is still within the current regulatory gearing limit of 50%.

Keppel DC REIT’s interest coverage ratio remained healthy at 13.3x as well.

I like interest coverage ratio to be above 5x for REITs.

Keppel DC REIT’s high interest cover of 13x shows that even if the REIT’s NPI were to decline drastically for any reason, the REIT would still be able to service its debt.

Another aspect to like about Keppel DC REIT is that it has a well-spaced out debt maturity profile with an average tenor of around three years.

This ensures that a huge portion of its debt doesn’t come due in any one particular year.

Almost 100% Portfolio Occupancy 

The third chart shows Keppel DC REIT’s portfolio strength.

Source: Keppel DC REIT 2020 earnings presentation

Keppel DC REIT’s high occupancy rate of 97.8% and long weighted average lease expiry (WALE) of 6.8 years provides investors with a stable and predictable income stream.

The REIT is likely to see continued business growth over the long run, especially with the COVID-19 pandemic accelerating technology adoption.

Keppel DC REIT’s manager expects the global trend of digitalisation to continue post-pandemic.

At Keppel DC REIT’s unit price of S$2.93, it has a price-to-book ratio of 2.5x.

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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the company mentioned.

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About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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