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Keppel DC REIT (AGX: AJBU) is a Singapore-based real estate investment trust (REIT), established with the main investment strategy of investing in a portfolio of income-producing real estate assets which are used primarily for data centre purposes, with an initial focus on Asia Pacific and Europe.

My Story Of How I Bought It

Keppel DC REIT (SGX: AJBU) first did its initial public offerings (IPO) back on December 12, 2014, at a price of $0.93 per unit.

I first got to know of this REIT back in the middle of 2015 when my friend told me about it and I have been interested in owning some of it ever since.

However, ever since it IPO-ed back in 2014, the price have been hovering at above $1 – $1.1.

The only time it went below $1 was when it briefly touched $0.99 during the August 2015 market correction. My target price of buying it is below $1.

On January 22nd 2016, I bought 8800 shares of Keppel DC REIT (AGX: AJBU) at the price of $0.97.

Why I Bought It

These are my main investment thesis of owning Keppel DC REIT (SGX: AJBU):

  1. Unique exposure into the highly specialised and resilient data centre providers market

    – Keppel DC REIT offers retail investors access to income derived from data centres and it is a more specialised REIT  as compared to the usual REIT whose incomes are usually derived from shopping malls, office rental income etc.

  2. Stable Earnings Visibility

    –  With the rise in the number of global internet users and the increasing popularity of e-commerce, data creation is poised to grow further in the future.

    More organisations would prefer leasing data centres as compared to managing the increasing complexity of running in-house data centres – so that they could focus on their core competencies.

    Furthermore, there is a higher barrier to entry for Data Centres REIT as compared to other REIT such as Retail, Offices and Industrial. These are some of the competitive advantages that Keppel DC REIT has that would protect its earnings in the future.

  3. Low valuation at $0.97 with NAV at $0.92

    – As a value investor – as you can see from my investment philosophy , I only buy a stock when it is on discount.

    At the price of $0.97 and with an NAV of $0.92, it is trading at a Price to NAV of 1.05.

    With the Distribution per unit (DPU) expected to grow even further and a high dividend rate of 6.5% expected this year (Non – taxable for Singapore), to me this is a no-brainer.

The main risk for me concerning this REIT would probably be in their inability for them to raise funds to build more data centres. Still, the risk to reward ratio looks good to me based on the rising trend of e-commerce and it is way undervalued based on a simple Gordon Growth Model (One of the dividend discount model used to value companies based on their dividend payout).

Disclosure: I have am long on Keppel DC REIT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. 

Important: Please Read My Full Disclaimer.

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