Balancing Prudence and Opportunity: My Near-Miss with Keppel DC REIT and Portfolio Strategy Update
Good day everyone.
Today is a bittersweet day. While all my holdings are doing well with the recent market rally, it is getting tricky to find cheap entries.
I had my sights on Keppel DC Reit which dipped sharply over the past two days. This is happening because of the letter of demand issued on Dec 15 to its tenant of three Guangdong data centres (DCs) to recover 48.3 million yuan (S$9.1 million) of owed rentals and related expenses.
The Manager mentioned that on a full-year basis for financial year 2023, if the owed funds cannot be recovered as of Dec 31, the REIT would face a negative impact on the distribution per unit (DPU) of about 0.655 cents. This is 6.4% of the REIT’s distribution for the previous financial year.
While the risk of not getting payment is there, China represents less than 10% of its revenue breakdown. Furthermore, Data Centers are going to be in evermore demand as technologies grow. I felt it was an acceptable risk to buy in at $1.77.
Alas, the price action did touch $1.77 before recovering to back above $1.8.
I could have bought in at $1.78 but I wanted to be more prudent and figured that a cent cheaper will be less risky. So now I missed the boat! Having said so, I need to remain disciplined and focus on the fact that it is better to miss an opportunity than to be at a loss.
While Citi research analyst Brandon Lee kept his “buy” call on Keppel DC REIT, he lowered the target price to $2.18 from $2.30 after attending a call for analysts held by the REIT.
I would be monitoring the price tomorrow to see if a buying opportunity is still viable.
In the meantime, I updated the Portfolio page with my ETF holding. This is to help me increase my S-REITs exposure while waiting for good opportunities. The regular buy in helps mitigate wrong entries!
