Shortly after market hours this evening (31 January 2023), Asia’s first pure-play data centre REIT in Keppel DC REIT (SGX:AJBU) released its results for the fourth quarter, as well as for the full year ended 31 December 2022 (i.e. FY2022.)

At the time of writing, the REIT’s portfolio comprises a total of 23 data centres in the following locations (with the number of data centres in each location in brackets): Singapore (6), Australia (2), China (3), Malaysia (1), Germany (2), Ireland (2), Italy (1), The Netherlands (3), and The United Kingdom (3.) Also, the REIT is a constituent of Singapore’s benchmark Straits Times Index (STI) since October 2020.

So, how did the REIT performed in terms of its financial results, portfolio occupancy and debt profile? Let us find out in the rest of this article, including the REIT’s distribution payout to unitholders:

Financial Results (FY2021 vs. FY2022, and Q4 FY2021 vs. Q4 FY2022)

In this section, you’ll find the data centre REIT’s financial results first on a year-on-year (y-o-y) basis (i.e. FY2021 vs. FY2022), followed by its results on a quarter-on-quarter (q-o-q) basis (i.e. Q4 FY2021 vs. Q4 FY2022) which I’ve computed based on its results in the previous quarters:

FY2021 vs. FY2022:

FY2021FY2022% Variance
Gross Revenue
Property Operating
Expenses (S$’mil)
Net Property
Income (S$’mil)
Distributable Income
to Unitholders

My Observations: On a full-year basis, the data centre REIT’s results is pretty much a muted one – with its gross revenue and net property income just inching up by 2.3% and 1.8% respectively, contributed by acquisitions of Guangdong DC 1, 2, and building shell of Guangdong DC 3, London DC, Eindhoven DC, positive income reversions, as well as contributions following the completion of AEIs (asset enhancement initiatives) at DC1 and the Dublin assets, along with the completion of IC3 East DC. However, this was offset by net lower contributions from the Singapore colocation assets, largely from higher facility expenses including electricity, staff, and maintenance costs, along with provisions made for DXC at KDC SGP 1, along with depreciation of foreign currencies against the Singapore Dollar, and the cessation of contribution following the divestment of iseek DC.

The 8.1% increase in property operating expenses can be attributed to expenses incurred by the REIT’s assets in Dublin.

Finally, the 7.7% improvement in distributable income to unitholders is due to income from the NetCo debt securities, and net gains on derivatives recorded.

Q4 FY2021 vs. Q4 FY2022:

Q4 FY2021Q4 FY2022% Variance
Gross Revenue
Property Operating
Expenses (S$’mil)
Net Property
Income (S$’mil)
Distributable Income
to Unitholders

My Observations: On a q-o-q basis, its financial performance is a tad better, largely contributed by revenue contributions from the newly acquired properties.

Portfolio Occupancy Profile (Q3 FY2022 vs. Q4 FY2022)

One of the things I like about the REIT (and also one of the reasons why I’ve made the investment decision in it) is its very strong portfolio occupancy profile – where, over the years, its overall occupancy have been maintained at above 90.0+%, along with a long portfolio weighted average lease expiry (WALE) of more than 6 years at least – both of which guarantees income stability.

So, did the data centre REIT’s portfolio occupancy profile continue to report strong numbers? Let us take a look at it in the table below, where I will be comparing the statistics reported for the current quarter under review (i.e. Q4 FY2022 ended 31 December 2022) against that reported in the previous quarter 3 months ago (i.e. Q3 FY2022 ended 30 September 2022):

Q3 FY2022Q4 FY2022
Portfolio Occupancy
Portfolio WALE
8.7 years8.4 years

My Observations: In my opinion, the REIT’s portfolio occupancy profile continued to remain very resilient, with the overall portfolio portfolio occupancy rate at 98.5%.

Rental expiries are also well-staggered out in the coming financial years ahead – with 4.6% (by lettable area) and 14.5% (by rental income) expiring in the year 2023, 5.5% (by lettable area) and 23.8% (by rental income) expiring in 2024, 26.4% (by lettable area) and 22.1% (by rental income) expiring in 2025, and the remaining 63.5% (by lettable area) and 39.6% (by rental income) only expiring in 2025 or later.

In terms of income stability, I note that there are built-in income and rental escalations based on Consumer Price Index or similar indexation, or fixed rate mechanisms embedded in more than half of the portfolio. Also, more than 90% of electricity costs are passed through to colocation tenants, with master lease clients contracting electricity directly with the power suppliers – this minimises any headwinds associated with the increase in electricity costs on the REIT.

Debt Profile (Q3 FY2022 vs. Q4 FY2022)

With the current rising interest rate environment, a REIT’s ability to maintain a healthy debt profile becomes all the more important – in my opinion, REITs with a high percentage of borrowings hedged to fixed rates (upwards of 80.0%), along with one with a low percentage of borrowings due for refinancing over the next 2 years (around the range of 20+%) lesser impacted than those that do not.

So, is the REIT’s debt profile able to stand up to the current rising interest rate environment? Let us take a look at it in the table below, where I’ve compared the statistics reported for the current quarter under review (i.e. Q4 FY2022) against that reported in the previous quarter (i.e. Q3 FY2022):

Q3 FY2022Q4 FY2022
Aggregate Leverage
Interest Coverage
Ratio (times)
Average Term to Debt
Maturity (years)
3.9 years3.7 years
Average Cost of
Debt (%)
% of Borrowings Hedged
to Fixed Rates (%)

My Observations: As expected, the REIT’s debt profile have weakened slightly in light of the current high interest rate environment – however, its aggregate leverage, at 36.4%, is still a good distance away from the regulatory limit of 50.0%.

Another thing to note is that, the REIT has minimal borrowings maturing in the coming years ahead – 11.1% maturing in the coming 2023 ahead, 4.0% maturing in 2024, 6.8% maturing in 2025, and the remaining 78.1% maturing only in 2026 or later – this minimises any impact of interest rate hikes on the REIT, and also on its distribution payout to unitholders.

Distribution Payout to Unitholders

The management of Keppel DC REIT declares a distribution payout to unitholders on a half-yearly basis – once when it releases its results for the first half of the financial year (known as interim distribution), and another when it releases its results for the second half of the financial year (known as final distribution.)

For the second half of the current financial year, the REIT’s management have declared a distribution payout of 5.165 cents/unit – compared to its payout of 4.927 cents/unit in the same time period last year, this represents a 4.8% improvement.

Together with the interim distribution payout of 5.049 cents/unit, the REIT’s total distribution payout for FY2022 amounts to 10.214 cents/unit, a 3.9% increase compared to a total distribution payout of 9.851 cents/unit in FY2021.

If you are a unitholder of the REIT, do take note of the following dates regarding the payout of distributions:

Ex-Date: 07 February 2023
Record Date: 08 February 2023
Payout Date: 14 March 2023

Management’s Outlook Ahead

“In the January 2023 Global Economic Prospects report issued by the World Bank, global economic growth is forecast to decelerate to 1.7% in 2023, the third weakest pace in nearly three decades, apart from the global recessions caused by the COVID-19 pandemic in 2020 and the global financial crisis in 2009. Downside risks include higher inflation, tighter monetary policies, deeper weakness in major economies and rising geopolitical tensions.

Notwithstanding the macroeconomic headwinds, Gartner forecasts that worldwide end-user spending on public cloud services will grow 20.7% to US$591.8 billion in 2023 as compared to 18.8% growth in 2022. The agile and scalable nature of cloud computing will help to support growth during uncertain times. Further, industry trends including the acceleration of digitalisation, adoption of technologies such as the internet of things or artificial intelligence and the rise of the digital economy will continue to bolster demand for data centres. Strong continued growth of the colocation market is projected, driven by demand from large cloud and internet companies, as well as enterprises moving their IT infrastructure off premise.

The Manager remains cautiously optimistic on growth opportunities and will continue to drive growth in its diversified global portfolio of data centres by strengthening its income resilience through acquisitions.”

Closing Thoughts

2 things I like about the REIT’s latest results – its portfolio occupancy, as well as its debt profile.

For the former (portfolio occupancy), I like the fact that its portfolio occupancy rate is very strong at 98.5%. Also, with built-in income and rental escalations embedded in more than half of the portfolio, it provides a certain level of income stability.

For the latter (debt profile), no doubt it has just 74% of borrowings hedged to fixed rates, but looking ahead, only 15.1% of its borrowings will be maturing over the next 2 years (from now till the end of 2024), meaning the REIT’s impact to the rising interest rate environment is minimised to a certain extent – in fact, the REIT is one of the few Singapore-listed REITs that have such a low percentage of borrowings expiring over the next 2 years – which is something I desire.

With that, I have come to the end of my review of Keppel DC REIT’s latest full-year results. As always, I hope you’ve found the contents above useful, and do take note that all the comments above are purely my own, which I’m sharing for educational purposes only. They do not represent any buy or sell calls for the REIT’s units. You’re strongly advised to do your own due diligence before you make any investment decisions.

Related Documents

Disclaimer: At the time of writing, I am a unitholder of Keppel DC REIT.

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