Digital Core REIT's 2H FY24 Result Review

$DigiCore Reit USD(DCRU.SI)$

Basic Profile & Key Statistics

Key Indicators

Performance Highlight

Gross revenue, NPI, and distributable income to unitholders saw significant YoY improvement, mainly due to the absence of straight-line rent write-offs from a customer bankruptcy in 2H 2023, increased colocation income from the two Los Angeles properties, and contributions from the newly acquired properties in 2024. However, the loss of income from the divestment of 2401 and 2403 Walsh Avenue partially offset these gains. Despite an enlarged unitholder base, DPU improved slightly.

Rental Reversion

Rental reversion for FY24 was 4.3%, reflecting positive lease renewals.

Acquisition

In December 2024, Digital Core REIT completed the acquisition of an additional 15.1% interest in the Frankfurt facility at an 18% discount to its appraised value.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Favorable

• REIT Manager's Shareholding: Favorable

• Directors of REIT Manager's Shareholding: Less Favorable

Lease Profile

• Occupancy: Moderate

• Highest Annual Lease Expiry in 4 Years: Favorable

• WALE: Moderate

• Weighted Average Land Lease Expiry: Favorable

Debt Profile

• Adjusted Interest Coverage Ratio: Favorable

• Cost of Debt: Moderate

• Gearing Ratio: Favorable

• Fixed Rate Debt Proportion: Favorable

• Unsecured Debt Proportion: Favorable

• Highest Annual Debt Maturity in 4 Years: Favorable

• WADM: Favorable

Diversification Profile

• Top Geographical Weightage: Favorable

• Top Property Weightage: Moderate

• Top 5 Properties' Weightage: Less Favorable

• Top Tenant Weightage: Moderate

• Top 10 Tenants' Weightage: Less Favorable

Key Financial Metrics

• Property Yield: Less Favorable

• Operating Distributable Income over Manager's Fees: Moderate

• Operating Distributable Income on Capital: Moderate

• Operating Distributable Income Margin: Moderate

• Operating Distribution Proportion: Less Favorable

DPU Breakdown

• TTM Distribution Breakdown:86.3% from Operation13.7% from Management Fees Paid in Units

Trends (Up to 10 Years)

• Uptrend: Operating Distributable Income over Manager's Fees, Operating Distributable Income Margin

• Slight Uptrend: None

• Flat: Top 5 Properties' Weightage, Operating Distributable Income on Capital

• Slight Downtrend: Committed Occupancy, Top 10 Tenants' Weightage

• Downtrend: DPU from Operations, NAV per Unit, Adjusted Interest Coverage Ratio, Property Yield, Operating Distribution Proportion

Price Range & Relative Valuation Metrics

• Dividend Yield: Above +2SD for 1y; Average for 3y & 5y

• P/NAV: Below -1SD for 1y; Average for 3y & 5y

Author's Opinion

Compared to the previous half-year, gross revenue improved mainly due to a full six-month contribution from the additional 10% interest in the Osaka data center and the 24.9% stake in the Frankfurt facility. However, NPI growth was moderated by higher property expenses, particularly utilities, repairs, and maintenance. DPU remained stable. On the debt front, there is no maturity until 2027.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decision.