The 12th part of my investment portfolio in which objective is to create wealth to retire.
Stock : Kep DC Reit
Kep DC Reit, a spin off from Kep T&T and listed on Singapore Exchange on 12th Dec 2014 with an IPO price of $0.93, projected dividend yield of 6.8% for FY2015 with reference to the IPO price. It is a first data centre reit to be listed in Asia and sponsored by Kep T&T (indirectly to Kep Corp). Its current assets included 2 from Singapore, 2 from Australia, 1 from Malaysia, 1 from UK, 1 from The Netherlands and 1 from Ireland. It has a weighted average lease expiry of 7.8 years and occupancy rate of 93.5%. In additional, it also forecasts a 4.5% growth of dividend yield to 7.1% for FY2016.
Acquired Kep DC Reit through IPO at the price of $0.93. As a REIT, it naturally classified under "income stock" in my investment portfolio. As it was through the application of IPO hence did not get the quantity which I wanted to but will not rush in to purchase more too. I will wait in patience to accumulate the remaining quantity.
Potential Upside :
The potential upside for Kep DC Reit is the increase in distribution and capital appreciation down the road. In the modern day of digital era whereby almost everything are done electronically, digital data will be a precious assets to any companies. To manage those data by itself might be cost extensive (needs extra office space and manpower) and thus the proxy of data centre will be a more viable options for most companies. With a strong sponsor in Kep T&T (indirectly Kep Corp), would expect it has the financial muscle to acquire more assets in the future, be it domestically or internationally.
Potential Downside :
Potential downside could arise from increase competition in which acquiring more yield-accretive assets would be difficult to grow the Reit. Another downside is should the data housing in the data centre being attacked by hackers or damage due to disaster (earthquake or fire), this would put a dent in its income. It should have insurance against disaster but for hackers attack will be different story.
Personal Expectation :
As a fixed-income equity and "income stock", the minimum expectation for Kep DC Reit is to maintain at least 4% of distribution yield even in the case of recession. Data centre should be considered as recession proof because as long as the companies do not bankrupt they still need to house their important data there. Imagine in the case of SGX even if economy recession it still have to be in operation and its data still need to be housed in those data centre. The secondary expectation is the management has the ability to bring in more yield-accretive assets either domestically or internationally to grow its assets portfolio. By doing so, this should provide unitholders with higher distribution yield and capital appreciation of the stock.
Kep DC Reit
