Buy Rating Backed by Strong Income Growth, Lower Leverage, and Data-Centre-Led Expansion Potential

Keppel DC REIT, the Real Estate sector company, was revisited by a Wall Street analyst today. Analyst Darren Chan from Phillip Securities upgraded the rating on the stock to a Buy and gave it a S$2.37 price target.

Darren Chan has given his Buy rating due to a combination of factors that highlight both income growth and balance-sheet strength. He notes that distributions per unit have risen on the back of recent data-centre acquisitions in Singapore and Tokyo, better terms achieved on contract renewals and built-in rental escalations, as well as reduced financing expenses. Portfolio occupancy is holding at a high level of 95.8%, while rental reversions for FY25 were very strong, indicating that the REIT has been able to push through substantial rent increases and is well positioned to sustain this momentum into FY26, especially as a sizable portion of upcoming lease expiries are in Singapore colocation assets.

In addition, Chan points out that the REIT’s cost of debt is trending lower and aggregate leverage of 35.3% leaves meaningful headroom for further acquisitions within its internal gearing limit, supporting future growth. Portfolio valuations have also increased both on a same-asset basis and including acquisitions, underpinned by robust performance in key markets such as Singapore and Ireland, which helps offset softness in other geographies. He further highlights potential upside catalysts, including the possible recovery of more than S$50mn in overdue rent from a tenant and the expected grant of tax transparency for two Singapore assets, which would enhance distributable income. At the current price, the units offer an attractive forward distribution yield, which underpins his positive total-return outlook and justifies the Buy recommendation.

Chan covers the Real Estate sector, focusing on stocks such as Frasers Centrepoint, Suntec Real Estate Investment, and Prime US REIT. According to TipRanks, Chan has an average return of 9.2% and a 72.55% success rate on recommended stocks.

In another report released today, DBS also maintained a Buy rating on the stock with a S$2.60 price target.