Keppel DC Reit (SGX. AJBU) announced its second half 2021 results today.
Most importantly for unitholders, dividend per unit (DPU) increases 7.4% Year-on-Year to 9.851 cents.
As an advanced distribution of 1.421 cents has been paid on 20 Oct 2021, the DPU is 3.506 cents to be paid on 10 Mar 2022.
Even though DPU increases due to higher distributable income, this set of results is not perfect because net property income (NPI) and gross revenue actually decreases 4.3% and 4.0% respectively as compared to 2H 2020.
It is important to note that acquisitions completed in Dec 2021 - Guangdong Data Centre, London Data Centre In Bracknell and the M1 network infrastructure have not fully contributed to the distributable income of Keppel DC Reit.
I believe Keppel DC Reit should be able to continue grow its DPU, but at a slower rate.
Higher risks, lower growth rate, higher interest rates potentially increasing financing costs and losing its pure data centre play status to Digital Core Reit have caused the share price of Keppel DC Reit to weaken in recent months to a fairly attractive level of $2.20s.
The average cost of debt of Keppel DC Reit remains low at 1.6% per annum and interest coverage ratio is high at 10.8 times. Gearing remained healthy at 34.6%. The higher interest rates should have some but limited impact on its financing costs and hopefully impact its potential DPU growth.
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