KDCREIT to benefit from growth in inference AI and AI agents

KDCREIT has just acquired two data centres, which will contribute to its earnings in early 2025.

UOB KayHian said being a pure play on data centres, Keppel DC REIT (KDCREIT) is poised to benefit from the growth in inference AI and AI agents.

KDCREIT completed the acquisition of 99.49% economic interest in SGP7 and SGP8 on 27 December 2024. This will begin contributing to its earnings in early 2025.

The two data centres are designed for AI inference workloads with ultra-low latency connectivity and provide an NPI yield of 6.5% to 7%.

The contracted rents for SGP7 and SGP8 are estimated to be 15% to 20% below comparable market rents for colocation.

UOB KayHian also stated that there is potential for rental uplift as demand for data centres is expected to remain strong.

SGP8 currently has 1.5 floors of unutilised space, which can be fitted out and converted into data halls to generate more rental income.

Additionally, KDCREIT has achieved strong positive rental reversion of >30% in Q4 2024, whilst its aggregate leverage has improved 8.2 percentage points (pp) quarter-on-quarter to 31.5% in Q4 2024 due to revaluation gains and its recent equity fundraising exercise.

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