CGS-CIMB Research analyst Lock Mun Yee has maintained her “add” recommendation on Keppel DC REIT (KDC REIT) with a slightly higher target price estimate of $2.63 from $2.62 previously after the REIT announced that it will be acquiring two data centres in China on June 20.
The data centres will be purchased at a consideration of RMB1.38 billion ($297.1 million) or at a 0.6% discount to independent valuations.
Following the purchase, Lock has raised her distribution per unit (DPU) estimates by 0.7% for the FY2022, 1.57% for the FY2023 and 3.21% for the FY2024 as she factors in the contributions from the new acquisitions.
“[We also] assume a 55/45 debt/equity funding structure,” she writes.
Despite KDC REIT’s recent share price decline, Lock remains positive on the REIT’s prospects.
“We believe the longer-term demand for data centres remain intact and will underpin KDCREIT’s income resilience in the longer term,” she says.
At its current share price, the REIT is trading at an FY2022 dividend yield of 5.3%, according to the analyst’s estimates.
A faster pace of acquisitions is a potential re-rating catalyst for the REIT while a larger-than-expected impact from higher electricity costs are downside risks.
As at 11.26am, shares in Keppel DC REIT are trading 4 cents higher or 2.09% up at $1.95.
