SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

Keppel Infrastructure Trust / Equity Bottom-Up

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<ul>
<li>
Of the trusts on SGX, the three largest belonging to the Keppel Group are Keppel DC REIT , Keppel REIT, and Keppel Infrastructure Trust. Recently, the trio unveiled their business updates for the three months ended 30 September 2020. 
	 </li>
	<li>
For 3Q 2020, KDC REIT reported a 47.6% YoY increase in distributable income to S$40.5 million, while K-REIT unveiled a 4.6% YoY gain in distributable income from operations to S$47.6 million. KIT reported a Group EBITDA of S$83.0 million, up 7.0% YoY. 
	 </li>
	<li>As at 30 September 2020, KDC REIT, K-REIT and KIT reported an average aggregate leverage ratio of 34.6%, compared with an average 34.8% as at 30 June 2020. Interest cover for KDC REIT and K-REIT stood at 12.7 times and 3.9 times respectively, versus 12.8 times and 3.5 times in the previous period.</li>
</ul>
 

Of the trusts on SGX, the three largest belonging to the Keppel Group are <a href="https://www.keppeldcreit.com/en/home.aspx">Keppel DC REIT</a> (KDC REIT), <a href="https://www.keppelreit.com/">Keppel REIT</a> (K-REIT), and <a href="https://www.kepinfratrust.com/">Keppel Infrastructure Trust</a> (KIT). Recently, the trio unveiled their business updates for the three months ended 30 September 2020.

Earnings for 3Q ended 30 September 2020

<ul>
<li>
Keppel DC REIT: Distributable income increased 47.6% YoY to S$40.5 million, while DPU increased 22.1% YoY to 2.357 cents, driven by strong leasing momentum – new take-ups at colocation facilities in Singapore and Dublin, and an early lease renewal at iSeek Data Centre in Brisbane, Australia, were secured.</li>
	<li>
Keppel REIT: Distributable income from operations was S$47.6 million, up 4.6% YoY due mainly to the commencement of income contribution from 311 Spencer Street in Melbourne, which achieved practical completion on 9 July 2020, and lower interest expenses.</li>
	<li>
Keppel Infrastructure Trust: Group EBITDA performance was resilient, up 7.0% YoY to S$83.0 million, supported by strong operational execution, productivity improvements and prudent cost management, in particular for Ixom and City Gas.</li>
</ul>
<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			Distributable Income (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
			<td>
			Net Property Income (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
			<td>
			Gross Revenue (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
		</tr>
<tr>
<td>
			KEPPEL DC REIT
			</td>
			<td>
			40.5
			</td>
			<td>
			47.6
			</td>
			<td>
			62.4
			</td>
			<td>
			47.6
			</td>
			<td>
			67.7
			</td>
			<td>
			46.0
			</td>
		</tr>
<tr>
<td>
			KEPPEL REIT
			</td>
			<td>
			47.6
			</td>
			<td>
			4.6
			</td>
			<td>
			31.3^
			</td>
			<td>
			7.9
			</td>
			<td>
			44.8*
			</td>
			<td>
			5.7
			</td>
		</tr>
</tbody></table>
<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			Group EBITDA (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
			<td>
			Operational Cash Flows (S$M)
			</td>
			<td>
			YoY Chg (%)
			</td>
		</tr>
<tr>
<td>
			KEPPEL INFRASTRUCTURE TRUST
			</td>
			<td>
			83.0
			</td>
			<td>
			7.0
			</td>
			<td>
			53.4
			</td>
			<td>
			-16.2
			</td>
		</tr>
</tbody></table>
 Source: Company data

*Property Income

^Attributable to unitholders Debt Profiles

As at 30 September 2020, KDC REIT, K-REIT and KIT reported an average aggregate leverage ratio of 34.6%, compared with an average 34.8% as at 30 June 2020. KDC REIT had the highest aggregate leverage ratio of 35.2%, while KIT scored the lowest with 33.7%. Interest cover for KDC REIT and K-REIT stood at 12.7 times and 3.9 times respectively as at 30 September 2020, versus 12.8 times and 3.5 times as at 30 June 2020.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			Aggregate Leverage Ratio (%) as at 30 Sep 2020
			</td>
			<td>
			Aggregate Leverage Ratio (%) as at 30 June 2020
			</td>
			<td>
			Interest Coverage Ratio (x) as at 30 Sep 2020
			</td>
			<td>
			Interest Coverage Ratio (x) as at 30 June 2020
			</td>
		</tr>
<tr>
<td>
			KEPPEL DC REIT
			</td>
			<td>
			35.2
			</td>
			<td>
			34.5
			</td>
			<td>
			12.7
			</td>
			<td>
			12.8
			</td>
		</tr>
<tr>
<td>
			KEPPEL REIT
			</td>
			<td>
			35.0
			</td>
			<td>
			36.3
			</td>
			<td>
			3.9
			</td>
			<td>
			3.5
			</td>
		</tr>
<tr>
<td>
			KEPPEL INFRASTRUCTURE TRUST
			</td>
			<td>
			33.7
			</td>
			<td>
			33.6
			</td>
			<td>
			NA
			</td>
			<td>
			NA
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			34.6
			</td>
			<td>
			34.8
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
		</tr>
</tbody></table>
 Source: Company data 
 

Outlook 
Keppel DC REIT

<ul>
<li>Resilient asset class that supports the digital economy</li>
	<li>COVID-19 and the changes in working practices accelerated shift to hosted and cloud collaboration solutions</li>
	<li>Cloud is increasingly dominating the IT landscape: Annual spending on cloud services expected to double in under four years – Synergy Research</li>
	<li>COVID-19 has accelerated the move to keep data in-country due to stricter border controls as well as more stringent security and data sovereignty regulations</li>
	<li>APAC data centre spending to surpass US$30 billion by 2023 to account for &gt;30% of global market – Danseb Consulting</li>
	<li>Global colocation market expected to grow by 15% in 2020 – Danseb Consulting</li>
	<li>&gt;70% of all hyperscale data centers are located in facilities that are leased or owned by partners</li>
	<li>European data centre market to grow by &gt;40% to over US$20 billion by 2023, despite limited new supply – Danseb Consulting</li>
	<li>Enterprise spending on cloud infrastructure expected to grow by 22% CAGR over next 5 years – Danseb Consulting</li>
	<li>Global mobile data traffic expected to increase by 31% annually from 2019 to 2025 – Ericsson</li>
	<li>Stable income streams with portfolio occupancy of 96.7% and long WALE of 7.2 years</li>
	<li>Limited interest rate exposure with 68% of borrowings hedged over the entire loan term, with the remaining unhedged borrowings in EUR</li>
	<li>Forecasted foreign-sourced distributions hedged till 1H 2022 through foreign currency forward contracts</li>
	<li>The Manager will continue to strengthen Keppel DC REIT’s presence and position it to capitalise growth opportunities in the data centre industry</li>
</ul>
 

Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/I4CNV0CBYB7JZO16/635771_KDCREIT%203Q2020%20Operational%20Updates_FINAL.pdf">here</a> for full results release. 
 

Keppel REIT

<ul>
<li>Keppel REIT’s quality office portfolio and high-quality tenant profile continue to provide income stability and resilience</li>
	<li>Portfolio committed occupancy remained high at 98.3%; portfolio weighted average lease expiry was extended to 7.1 years; top 10 tenants’ WALE was 12.3 years</li>
	<li>To support tenants, and in line with government measures, measures were implemented to alleviate tenants’ cashflow and cost pressures</li>
	<li>Committed to delivering stable income and sustainable returns</li>
	<li>Portfolio optimisation to improve yield, while maintaining exposure to Singapore CBD</li>
	<li>Hold quality assets across different markets for improved income stability and to provide more long-term growth opportunities</li>
	<li>Drive individual asset performance with proactive leasing and cost management strategies</li>
	<li>Implement initiatives to future-proof assets and enhance sustainability</li>
	<li>Optimise capital structure to reduce borrowing costs and improve returns</li>
	<li>Manage debt maturities and hedging profiles to reduce risk</li>
	<li>Singapore office market: Average Grade A office rents registered a decrease to $10.70 psf pm in 3Q 2020 while average occupancy in core CBD decreased to 93.9% – JLL Research</li>
	<li>Australia office market: General decline in the office market occupancy across the various cities during the quarter – JLL Research</li>
	<li>Seoul office market: CBD Grade A occupancy remained stable at 85.1% in 3Q 2020 – JLL Research</li>
</ul>
 

Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/V9UF8PXRSW2UDIGH/635650_KREIT%203Q_9M%202020%20business%20and%20operational%20updates.pdf">here</a> for full results release. 
 

Keppel Infrastructure Trust

<ul>
<li>The Trustee-Manager will harness the synergies of its three-pronged growth strategy to achieve its goal of long-term value creation</li>
	<li>Generate sustainable cash flows from the Trust’s well-diversified portfolio of businesses and assets</li>
	<li>Drive organic growth from existing going concern businesses, including City Gas and Ixom, that are supported by long-term favourable demand trends</li>
	<li>Drive strong operational performance and efficiencies, as well as fulfill all  contractual requirements to ensure stable cash flows</li>
	<li>Achieve operational excellence and asset optimisation to extract further value</li>
	<li>Maintain an optimal capital structure to support growth initiatives, and maximise returns for unitholders</li>
	<li>Implement sustainable practices, where feasible, to support a sustainable future for KIT and its stakeholders</li>
	<li>Seek leading businesses and assets with the following investment characteristics:
	<ul>
<li>Generate defensive cash flows and revenues that are inflation-linked and/or GDP-linked with potential for growth</li>
		<li>Possess high barriers to entry</li>
		<li>Are key providers of essential products and services</li>
	</ul>
</li>
	<li>Potential bolt-on acquisitions at City Gas and Ixom</li>
	<li>Undertake co-investment and incubation opportunities with Keppel Capital and/or the Sponsor</li>
	<li>Partner with experienced operators on greenfield investments with limited construction exposure 
	 </li>
</ul>
 Click <a href="https://links.sgx.com/1.0.0/corporate-announcements/SGQNCXF5PCM3A13C/635903_KIT%20-%203Q20%20Business%20Update_final.pdf">here</a> for full results release.
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Of the trusts on SGX, the three largest belonging to the Keppel Group are Keppel DC REIT , Keppel REIT, and Keppel Infrastructure Trust. Recently, the trio unveiled their business updates for the three months ended 30 September 2020. 
	 
	
For 3Q 2020, KDC REIT reported a 47.6% YoY increase in distributable income to S$40.5 million, while K-REIT unveiled a 4.6% YoY gain in distributable income from operations to S$47.6 million. KIT reported a Group EBITDA of S$83.0 million, up 7.0% YoY. 
	 
	As at 30 September 2020, KDC REIT, K-REIT and KIT reported an average aggregate leverage ratio of 34.6%, compared with an average 34.8% as at 30 June 2020. Interest cover for KDC REIT and K-REIT stood at 12.7 times and 3.9 times respectively, versus 12.8 times and 3.5 times in the previous period.

 

Of the trusts on SGX, the three largest belonging to the Keppel Group are Keppel DC REIT (KDC REIT), Keppel REIT (K-REIT), and Keppel Infrastructure Trust (KIT). Recently, the trio unveiled their business updates for the three months ended 30 September 2020.

Earnings for 3Q ended 30 September 2020



Keppel DC REIT: Distributable income increased 47.6% YoY to S$40.5 million, while DPU increased 22.1% YoY to 2.357 cents, driven by strong leasing momentum – new take-ups at colocation facilities in Singapore and Dublin, and an early lease renewal at iSeek Data Centre in Brisbane, Australia, were secured.
	
Keppel REIT: Distributable income from operations was S$47.6 million, up 4.6% YoY due mainly to the commencement of income contribution from 311 Spencer Street in Melbourne, which achieved practical completion on 9 July 2020, and lower interest expenses.
	
Keppel Infrastructure Trust: Group EBITDA performance was resilient, up 7.0% YoY to S$83.0 million, supported by strong operational execution, productivity improvements and prudent cost management, in particular for Ixom and City Gas.




			Name
			
			
			Distributable Income (S$M)
			
			
			YoY Chg (%)
			
			
			Net Property Income (S$M)
			
			
			YoY Chg (%)
			
			
			Gross Revenue (S$M)
			
			
			YoY Chg (%)
			
		


			KEPPEL DC REIT
			
			
			40.5
			
			
			47.6
			
			
			62.4
			
			
			47.6
			
			
			67.7
			
			
			46.0
			
		


			KEPPEL REIT
			
			
			47.6
			
			
			4.6
			
			
			31.3^
			
			
			7.9
			
			
			44.8*
			
			
			5.7
			
		




			Name
			
			
			Group EBITDA (S$M)
			
			
			YoY Chg (%)
			
			
			Operational Cash Flows (S$M)
			
			
			YoY Chg (%)
			
		


			KEPPEL INFRASTRUCTURE TRUST
			
			
			83.0
			
			
			7.0
			
			
			53.4
			
			
			-16.2
			
		

 Source: Company data

*Property Income

^Attributable to unitholders   Debt Profiles

As at 30 September 2020, KDC REIT, K-REIT and KIT reported an average aggregate leverage ratio of 34.6%, compared with an average 34.8% as at 30 June 2020. KDC REIT had the highest aggregate leverage ratio of 35.2%, while KIT scored the lowest with 33.7%. Interest cover for KDC REIT and K-REIT stood at 12.7 times and 3.9 times respectively as at 30 September 2020, versus 12.8 times and 3.5 times as at 30 June 2020.




			Name
			
			
			Aggregate Leverage Ratio (%) as at 30 Sep 2020
			
			
			Aggregate Leverage Ratio (%) as at 30 June 2020
			
			
			Interest Coverage Ratio (x) as at 30 Sep 2020
			
			
			Interest Coverage Ratio (x) as at 30 June 2020
			
		


			KEPPEL DC REIT
			
			
			35.2
			
			
			34.5
			
			
			12.7
			
			
			12.8
			
		


			KEPPEL REIT
			
			
			35.0
			
			
			36.3
			
			
			3.9
			
			
			3.5
			
		


			KEPPEL INFRASTRUCTURE TRUST
			
			
			33.7
			
			
			33.6
			
			
			NA
			
			
			NA
			
		


			Average
			
			
			34.6
			
			
			34.8
			
			
			 
			
			
			 
			
		

 Source: Company data 
 

Outlook 
Keppel DC REIT


Resilient asset class that supports the digital economy
	COVID-19 and the changes in working practices accelerated shift to hosted and cloud collaboration solutions
	Cloud is increasingly dominating the IT landscape: Annual spending on cloud services expected to double in under four years – Synergy Research
	COVID-19 has accelerated the move to keep data in-country due to stricter border controls as well as more stringent security and data sovereignty regulations
	APAC data centre spending to surpass US$30 billion by 2023 to account for &gt;30% of global market – Danseb Consulting
	Global colocation market expected to grow by 15% in 2020 – Danseb Consulting
	&gt;70% of all hyperscale data centers are located in facilities that are leased or owned by partners
	European data centre market to grow by &gt;40% to over US$20 billion by 2023, despite limited new supply – Danseb Consulting
	Enterprise spending on cloud infrastructure expected to grow by 22% CAGR over next 5 years – Danseb Consulting
	Global mobile data traffic expected to increase by 31% annually from 2019 to 2025 – Ericsson
	Stable income streams with portfolio occupancy of 96.7% and long WALE of 7.2 years
	Limited interest rate exposure with 68% of borrowings hedged over the entire loan term, with the remaining unhedged borrowings in EUR
	Forecasted foreign-sourced distributions hedged till 1H 2022 through foreign currency forward contracts
	The Manager will continue to strengthen Keppel DC REIT’s presence and position it to capitalise growth opportunities in the data centre industry

 

Click here for full results release. 
 

Keppel REIT


Keppel REIT’s quality office portfolio and high-quality tenant profile continue to provide income stability and resilience
	Portfolio committed occupancy remained high at 98.3%; portfolio weighted average lease expiry was extended to 7.1 years; top 10 tenants’ WALE was 12.3 years
	To support tenants, and in line with government measures, measures were implemented to alleviate tenants’ cashflow and cost pressures
	Committed to delivering stable income and sustainable returns
	Portfolio optimisation to improve yield, while maintaining exposure to Singapore CBD
	Hold quality assets across different markets for improved income stability and to provide more long-term growth opportunities
	Drive individual asset performance with proactive leasing and cost management strategies
	Implement initiatives to future-proof assets and enhance sustainability
	Optimise capital structure to reduce borrowing costs and improve returns
	Manage debt maturities and hedging profiles to reduce risk
	Singapore office market: Average Grade A office rents registered a decrease to $10.70 psf pm in 3Q 2020 while average occupancy in core CBD decreased to 93.9% – JLL Research
	Australia office market: General decline in the office market occupancy across the various cities during the quarter – JLL Research
	Seoul office market: CBD Grade A occupancy remained stable at 85.1% in 3Q 2020 – JLL Research

 

Click here for full results release. 
 

Keppel Infrastructure Trust


The Trustee-Manager will harness the synergies of its three-pronged growth strategy to achieve its goal of long-term value creation
	Generate sustainable cash flows from the Trust’s well-diversified portfolio of businesses and assets
	Drive organic growth from existing going concern businesses, including City Gas and Ixom, that are supported by long-term favourable demand trends
	Drive strong operational performance and efficiencies, as well as fulfill all  contractual requirements to ensure stable cash flows
	Achieve operational excellence and asset optimisation to extract further value
	Maintain an optimal capital structure to support growth initiatives, and maximise returns for unitholders
	Implement sustainable practices, where feasible, to support a sustainable future for KIT and its stakeholders
	Seek leading businesses and assets with the following investment characteristics:
	
Generate defensive cash flows and revenues that are inflation-linked and/or GDP-linked with potential for growth
		Possess high barriers to entry
		Are key providers of essential products and services
	

	Potential bolt-on acquisitions at City Gas and Ixom
	Undertake co-investment and incubation opportunities with Keppel Capital and/or the Sponsor
	Partner with experienced operators on greenfield investments with limited construction exposure 
	 

 Click here for full results release.



Quarterly Business Updates of Three Largest Keppel Trusts

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South Jersey Industries (SJI US)

Quarterly Business Updates of Three Largest Keppel Trusts

Of the trusts on SGX, the three largest belonging to the Keppel Group are Keppel DC REIT , Keppel REIT, and Keppel Infrastructure Trust....

Singapore Exchange Ltd (SGX)

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