Sunday, January 29, 2017

Keppel DC reit


Keppel DC reit is my first REIT which I bought as part of my investment. It is the first data center REIT to be listed in Asia with assets located around Europe and Asia. It pays out dividend semiannually with yearly distribution payout around 6% and gearing ratio around 29.4%.

Before I go into detail on this REIT, I would like to share this useful website where I can look through all REITs with a glance. It gives details on NAV, dividend, gearing ratio and price/NAV. As a rule of thumb, I will love to purchase a low price/NAV, low gearing ratio and high dividend payout. However, we still have to look at other aspects of the REIT.



Using Swot analysis. 

Strength
-Diversify
Their assets are located not just in Singapore but diversified over Europe and Asia. This will help to mitigate their risks.
-Long wale (weighted average lease expiry)
Wale is measurement of property portfolio's risk of going vacant. If a property is left vacant for period of time, it would affect the distribution to shareholder. Longer wale tends to be good for REIT.
-Good management
They have good management which is able to renew their rental ahead and hedge their earning against raising interest rate and Forex exchange.

Weakness
-Economic 
Slowdown in economic especially with Trump becoming US president and their protective policies.

Opportunities 
-Low gearing ratio allow more acquisition
With the recent right issue bringing down the gearing ratio, they have more room to acquire more asset.
-Expansion into other countries
This is data world where everyone is storing their photos and documents online. Data center will play an important role in this and I believe there is still room for oversea expansion in our neighbor countries where technology is catching up.
-New technology to cut cost
As the cost of maintaining the data center is expensive, if they can come out with technology to improve on efficiency, it will help them to lower the expenses and improve on profitability.

Threats
-Change in oversea regulation
Due to diversification, any change in oversea regulation would also affect Keppel D.C. Reit.
-Risking interest rate
FED is raising interest rate and any faster pace of raising interest rate, it will weigh on the earning.
-Forex exchange rate
As their earning come from oversea and any drastic change in exchange rate, it will also affect the profit.
-Compeitition from other companies
They must continue to manage their asset well in order to face compeitition from other companies.

I believe Keppel D.C. Reit still has room for improvement and will do well in the future. Currently, I am holding 4.2k of Keppel DC reit at average price of $1.15 which should be a pretty strong support. I also bough for my dad to give him passive income. I might add on when there is opportunity in the future. It is not a call to buy or sell, please do your own due diligent. I will continue to share more information along the way. If you have any idea to share, feel free to voice out.