Keppel DC REIT Delivers Strong 11% DPU Growth on Acquisitions and Rising Rents, ACCUMULATE Rating with S$2.46 Target July 31, 2026

Company Overview

Keppel DC REIT is a Singapore-listed real estate investment trust that owns and operates a diversified portfolio of data centres across key markets. The REIT focuses on providing mission-critical infrastructure to support the growing digital economy, with properties spanning multiple geographical regions including Asia-Pacific and Europe.

Strong Half-Year Performance Driven by Strategic Acquisitions

Keppel DC REIT delivered impressive results in the first half of FY26, with distribution per unit (DPU) reaching 5.71 Singapore cents, representing an 11.3% year-on-year increase. This performance was in line with analyst expectations and constituted 52% of the full-year forecast. The growth was primarily attributed to the accretive acquisition of Tokyo Data Centre 3, combined with positive rental reversions and escalations across the portfolio. However, these gains were partially offset by the divestment of Kelsterbach Data Centre.

Distribution income increased by 18.5% year-on-year, outpacing DPU growth due to an expanded unit base following equity fund raisings to finance recent acquisitions.

Rental Market Dynamics and Portfolio Performance

The REIT maintained healthy rental reversions at 10% during the first half, though second-quarter reversions moderated to approximately 5% compared to the exceptional 51% recorded in the first quarter. Looking ahead, rental reversions in the second half are expected to be higher, supported by the Gore Hill Data Centre lease renewal where rents more than doubled and will contribute from the third quarter onwards.

Portfolio occupancy declined to 92.5% from 95.6% in the first quarter due to the expiry of the Cardiff Data Centre contract. Despite this decrease, the earnings impact should be limited as 95% of revenue-generating power capacity remains contracted.

Financial Strength and Growth Prospects

The REIT maintains a robust balance sheet with ample debt headroom for future acquisitions. Aggregate leverage improved by 110 basis points quarter-on-quarter to 34% following repayment of the consumption tax loan for Tokyo Data Centre 3, leaving approximately S$673 million of debt headroom against its 40% internal cap. The average cost of debt increased marginally by 10 basis points to 2.7%, with forecasted foreign-sourced distributions substantially hedged through the first half of FY27.

Analysts maintain an ACCUMULATE rating with a raised target price of S$2.46, up from S$2.37, reflecting higher rental assumptions and continued NetCo Bonds contribution.

Frequently Asked Questions

Q: What drove Keppel DC REIT's 11% DPU growth in 1H26?

A: The growth was driven by the accretive acquisition of Tokyo Data Centre 3, positive rental reversions and escalations across the portfolio, partially offset by the divestment of Kelsterbach Data Centre.

Q: How did rental reversions perform during the period?

A: Rental reversions remained healthy at 10% in 1H26, with 2Q26 reversions moderating to approximately 5% compared to 51% in 1Q26. Higher reversions are expected in 2H26.

Q: What is the current occupancy rate and how does it affect earnings?

A: Portfolio occupancy declined to 92.5% from 95.6% in 1Q26 due to Cardiff Data Centre contract expiry. However, earnings impact should be limited as 95% of revenue-generating power capacity remains contracted.

Q: What is the analyst recommendation and target price?

A: Analysts maintain an ACCUMULATE rating with a raised target price of S$2.46, up from the previous S$2.37.

Q: How strong is the REIT's financial position for future acquisitions?

A: The REIT has a strong balance sheet with approximately S$673 million of debt headroom against its 40% internal cap, providing ample capacity for future accretive acquisitions.

Q: What are the expectations for rental reversions in FY26?

A: FY26 rental reversions are expected to be in the high-teens, driven by the Gore Hill Data Centre lease renewal, with only 2.6% of rental income due for renewal for the remainder of FY26.

Keppel DC REIT Delivers Strong 11% DPU Growth on Acquisitions and Rising Rents, ACCUMULATE Rating with S$2.46 Target

This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.

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About the author

Darren Chan

Darren has over seven years of experience across both the buy-side and sell-side. During his tenure as a fund manager, he managed multiple funds and mandates, including dividend income, growth, customised, Singapore-focused, and regionally focused strategies. He holds a First-Class Honours degree in Banking and Finance from the University of London.

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