Collaboration instead of litigation
- FY23 DPU of 9.383 Scts missed our projections by c.6%, entirely due to the rental default at Guangdong DCs
- KDCREIT is prioritising a collaborative but firm approach in its discussions with the tenant rather than litigation
- Revised estimates assume absence of income from Guangdong DCs in FY24; c.15% downward revision in DPU
- Maintain BUY but lowered TP to S$2.20
Revenues remained stable while NPI hit by provisions for uncollected rents. FY23 revenues amounted to S$281.2m, reflecting a 1.4% increase y-o-y. This growth can be primarily attributed to acquisitions completed in the preceding year, coupled with positive rental reversions and escalations. However, this upward trajectory in revenues was partially offset by reduced contributions from certain Singapore colocation assets. The decrease was attributed to escalated facility expenses, particularly higher utility costs.
Conversely, NPI declined 3.0%, totaling S$245.0m. This dip in NPI was primarily a consequence of provisions made for uncollected rents from the Guangdong DC, amounting to more than S$10.5m in FY23. Additionally, there were further provisions, totaling S$0.7m (in other trust expenses), specifically allocated for uncollected coupon payments from Guangdong DC 3.
