Inside The Bedokian’s Portfolio is an intermittent series where I will reveal what we have in our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will briefly give an overview of the counter, why I had selected it and what possibly lies ahead in its future.
For this issue, we will look at Keppel DC REIT.
Keppel DC REIT (KDC) was (and still is) the only locally listed, dedicated data centre REIT. Listed in 2014, it began with eight data centres in Singapore, Malaysia, Australia, United Kingdom, Netherlands and Ireland. Fast forward to 2020, KDC had expanded, holding 19 assets spread across eight countries.
Let us look at some key statistics of KDC1, 2, based on its closing price of SGD 3.03 on 18 Feb 2020:
- Trailing Dividend Yield: 2.66%
- Price-to-Book Value: 2.59
- Gearing: 34.5%
- Weighted Average Lease Expiry: 7.4 years
Back in 2014 while researching on the viability and future trends of E-commerce using associative investing, I had identified a few areas where I could tap onto this potential, and one of them was data centres. The opportunity came around that time when KDC was about to be listed and I had managed to secure some shares at the IPO phase.
Over the past six years, the developmental direction of the internet was not just moving along the E-commerce route, but other areas as well, such as cloud storages, the explosion of various social media platforms, and recently due to COVID-19, the push for the mass adoption of digital and virtual solutions. It was also mainly because of these factors that KDC showed resiliency, and its price went to an all-high time, despite suffering a slouch during the market’s dive back in March 2020.
With the current trends that I am observing, internet-based technologies and usages (including those that were mentioned in the previous paragraph) are on an upward trajectory, and data centres (and subsequently the REITs that are owning them) will benefit from this. Proving their importance, Mapletree Industrial Trust had completed its acquisition of their remaining interest in 14 data centres in the United States3, and is looking to acquire one more4, setting themselves for the potentiality of data centres.
There are challenges to be faced by data centres themselves, majority of which comes from the things that keep them going. Infrastructure issues like power management and efficient cooling need to be addressed constantly. Couple this with the increasing awareness of being green (data centres are known to be power guzzlers), these could form make-or-break factors in a tenant’s selection criteria.
Nevertheless, data centres in general (not just KDC’s) are the way to go.
Bought Keppel DC REIT at:
SGD 0.93, Dec 2014 (IPO)
SGD 1.155, Nov 2016 (Rights issue)
SGD 1.71, Sep 2019 (Preferential offer)
1 – Yahoo Finance. Keppel DC REIT. 18 Feb 2020. https://sg.finance.yahoo.com/quote/AJBU.SI/key-statistics?p=AJBU.SI (accessed 19 Feb 2020)
2 – Keppel DC REIT. First Half 2020 Financial Results. 21 July 2020. https://www.keppeldcreit.com/en/download.ashx?id=16893 (accessed 19 Feb 2020)
3 – Mui, Rachel. Mapletree Industrial Trust completes acquisition of 14 data centres in US. The Business Times. 2 Sep 2020. https://www.businesstimes.com.sg/companies-markets/mapletree-industrial-trust-completes-acquisition-of-14-data-centres-in-us (accessed 19 Feb 2020)
4 – Mui, Rachel. Mapletree Industrial Trust to buy US data centre for up to US$262.1m. The Business Times. 14 Sep 2020. https://www.businesstimes.com.sg/companies-markets/mapletree-industrial-trust-to-buy-us-data-centre-for-up-to-us2621m (accessed 19 Feb 2020)