Singapore, January 11, 2023 – UOB Kay Hian has recently commenced coverage on Keppel DC Reit (AJBU +0.54%) with a favorable “buy” recommendation and a target price set at S$2.10.
The financial institution sees significant potential for the real estate investment trust (Reit) to capitalize on the anticipated surge in the integration of artificial intelligence (AI) into daily life. Recognizing the computational intensity of AI, UOBKH suggests that this technological trend has the capacity to substantially increase the demand for data centre space, essential for accommodating computer servers and data storage.
According to a report dated January 11, UOBKH’s target price of S$2.10 implies a potential upside of 14% from Keppel DC Reit’s last trading price of S$1.84 recorded at 11:36 am on Monday. It’s noteworthy that Keppel DC Reit’s units remained stable at that time.
The research team at UOBKH highlighted Keppel DC Reit’s current trading position at 1.33 times its net asset value, representing a slight premium in comparison to domestic peers. However, it stands as a significant discount when contrasted with peers in the Asia-Pacific and US regions.
Additionally, the Reit boasts an FY2024 distribution yield of 5%, rendering it more attractive than Asia-Pacific peers (1.7%) and US peers (2.1%).
Keppel DC Reit distinguishes itself through its strategic focus on colocation data centres, contributing to stronger positive rental reversions observed in the third quarter of 2023. The Reit further solidifies its standing with a pipeline of potential acquisitions for data centres currently under development. These acquisitions are facilitated by sponsor Keppel Group’s private data centre funds and Keppel Telecommunications and Transportation, amounting to a substantial value exceeding S$2 billion.