Keppel DC REIT Earnings: Robust Data Center Demand Drives Strong Rental Reversions

Keppel DC REIT ended 2024 on a strong note, with second-half 2024 distribution per unit growing 13.2% year on year. This was underpinned by strong rental reversions, with the group recording a positive 39% for the full year. Management remains optimistic about the data center outlook, particularly in Singapore, and we expect robust reversions to persist, albeit at a moderated pace. The group’s balance sheet has also improved following the equity fundraising exercise back in November 2024, resulting in the aggregate leverage dropping to 31.5% as at end-2024 from 39.7% a quarter earlier. Management has guided this to drop further to 30.5%-31.0% after the completion of the sponsor subscription of the rights issue in the first quarter of 2025. As the results were in line with our expectations, we retain our fair value estimate of SGD 2.34 per unit. While we continue to like the trust for its data center portfolio that benefits from strong structural tailwinds such as artificial intelligence, we think the trust is fairly valued currently and encourage investors to wait for a better entry price.