Keppel DC REIT Rises 1% After Court Victory, Boosting Singapore Market

The Singapore stock market started the week on a positive note, as the Straits Times Index (STI) rose 0.4% to close at 3,246.77 points on Monday, January 8, 2024. The STI was boosted by gains in the banking, real estate, and consumer sectors, as well as optimism over the global economic recovery and the easing of COVID-19 restrictions.

One of the top performers on the STI was Keppel DC REIT, which saw its share price climb 1% to $1.94 on Monday, after the Singapore High Court ruled in its favor in a dispute with its tenant, HSBC Institutional Trust Services. The dispute involved a lease agreement for a data center property owned by Keppel DC REIT, which HSBC claimed was invalid due to a breach of contract by Keppel DC REIT. The court dismissed HSBC's claim and ordered it to pay Keppel DC REIT's legal costs.

Keppel DC REIT is a real estate investment trust (REIT) that owns and operates data centers in Singapore and other countries. It is the first data center REIT listed on the Singapore Exchange and the largest in Asia by assets under management. Keppel DC REIT's portfolio consists of 19 data centers across eight countries, with a total net lettable area of 1.5 million square feet. Keppel DC REIT's tenants include global technology companies, cloud service providers, and telecommunications operators.

Keppel DC REIT has a market capitalization of $3.4 billion and a dividend yield of 3.6% as of January 8, 2024. Keppel DC REIT's share price has increased by 14.1% in the past year, outperforming the STI's 9.4% gain. Keppel DC REIT's share price has also been supported by its strong financial performance, as it reported a 9.4% increase in revenue and a 21.3% increase in net property income for the third quarter of 2023, compared to the same period in 2022. Keppel DC REIT also announced a distribution per unit of 2.07 cents for the third quarter, a 10.7% increase from the previous quarter.

Analysts are bullish on Keppel DC REIT's prospects, citing its resilient business model, stable cash flow, and growth potential. PhillipCapital analyst Darren Chan upgraded his call on Keppel DC REIT from "neutral" to "buy", following the REIT's recent share price performance after its 3Q 2023 results. Chan's target price remains unchanged at $2.26. Chan said that Keppel DC REIT's fundamentals remain intact, despite the legal dispute, and that the REIT is well-positioned to benefit from the rising demand for data centers amid the digital transformation and the COVID-19 pandemic.

The Smart Investor also highlighted Keppel DC REIT as one of the five Singapore REITs that increased their share prices in 2023, and asked whether their run can continue. The Smart Investor noted that Keppel DC REIT has a strong competitive edge in the data center industry, as it has a diversified portfolio, a high occupancy rate, a long weighted average lease expiry, and a low gearing ratio. The Smart Investor also pointed out that Keppel DC REIT has ample opportunities to grow, both organically and inorganically, through asset enhancement initiatives, acquisitions, and development projects.

The Singapore stock market and Keppel DC REIT are expected to maintain their positive momentum, as the global economy recovers from the COVID-19 crisis and the demand for data centers remains robust. Investors who are looking for a stable and growing income stream may want to consider adding Keppel DC REIT to their portfolio.