Keppel DC REIT – Strong rental reversions in 1Q26 April 17, 2026 58

PSR Recommendation: ACCUMULATE Status: Maintained
Last Close Price: 2.35 Target Price: 2.37
  • 1Q26 DPU of 2.833 Singapore cents (+13.2% YoY) was in line with our expectations, forming 26% of our FY26e estimates. Growth was driven by the acquisitions of Tokyo Data Centre 3 and the remaining interests in Keppel DC Singapore 3 & 4, as well as stronger contributions from contract renewals and escalations, partially offset by the divestment of Kaltenbach Data Centre.
  • 1Q26 portfolio rental reversion remained strong at +51% (FY25: +45%), though this was based on a very small percentage of total leases (c.0.3%). Cost of debt declined by 20bps QoQ (40bps YoY) to 2.6% and is expected to remain stable through FY26e. Portfolio occupancy eased slightly, by 0.2 ppt, to 95.6%, due to client downsizing of non–data centre space, while portfolio WALE stayed healthy at 6.5 years.
  • We maintain ACCUMULATE with an unchanged DDM-derived TP of S$2.37. There is no change to our forecast. Potential recovery of over S$55mn in overdue rent from Bluesea remains a key catalyst, though still unresolved. We expect rental reversions to remain strong, but potentially lumpy for the 6% of rental income due for renewal per annum in FY26 and FY27, depending on lease maturities. There is limited first-order impact from the ongoing Middle East conflict, as electricity costs are fully passed through to colocation tenants; only common areas and vacant spaces are borne by KDCREIT, accounting for less than 3% of operating expenses. The stock trades at an FY26e DPU yield of 4.6%.

 

 

 

 

 

 

 

The Positives
+ Healthy financial metrics. The average cost of debt declined 20bps QoQ to 2.6%, with
84.8% of loans on fixed rates. Aggregate leverage stood at 35.1%, providing c.S$550mn of
debt headroom against the 40% internal cap to support acquisitions. We expect FY26e cost
of debt to remain stable at 2.6%, with 8.5% of debt due for refinancing in FY26.

The Negative
– Ongoing weakness at the Guangdong Data Centres. KDCREIT will continue to recognise
loss allowances for overdue rent. To date, Bluesea, the master lessee, has accumulated over
S$55mn in unpaid rent. Chip availability continues to be a bottleneck in China.

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About the author

Profile photo of Darren Chan

Darren Chan
Research Analyst
PSR

Darren has over three years of experience on the buy-side as a fund manager. During his time as fund manager, he has managed multiple funds and mandates including dividend income, growth, customised, Singapore focused and regionally focused funds. He graduated from the University of London with a First-Class Honours degree in Banking and Finance.

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