Keppel DC REIT downgraded by KGI as catalysts appear priced in

Singapore two-dollar bills

KGI downgraded Keppel DC REIT to Neutral from Outperform, saying near-term catalysts for the REIT look priced in.

The unit is trading at a historically high valuation of 1.6 times price-to-book and has “far outperformed” the industrial peer average of 1.2 times, KGI said in a note Wednesday.

“We prefer a more conservative price for accumulation and await a catalyst for near term re-rating,” KGI said.

The brokerage said it expected a third-party acquisition for a foreign data center could be in the acquisition timeline.

“An acquisition of that size could see a distribution per unit accretion of [around] 7.8 percent to 10.3 percent based on conservative assumptions,” KGI said. “Nonetheless, we think that this is likely priced in by the market at the current trading price.”

Keppel DC REIT reported second-quarter net property income rose 13.6 percent on-year to S$43.26 million, getting a boost from the 2018 acquisitions of maincubes Data Centre in Germany and Keppel DC Singapore 5.

KGI said the results were largely in line with its expectations, with first-half revenue coming in at 48 percent of its full year forecast.

The brokerage raised its target price for Keppel DC REIT to S$1.71 from S$1.62 after assuming a lower cost of equity.

The unit price was flat at S$1.73 at 4:53 P.M. SGT.

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