Data Centre – Call for Application (DC-CFA) is a Singapore government initiative (led by EDB and IMDA) to facilitate new, sustainable data centre capacity. DC-CFA2 (announced Dec 2025, closing March 31), requires a data centre to have 50% green energy and "best-in-class" energy efficiency with a PUE of at least 1.3.
“Additional upside could come from Singapore’s Green Data Centre Roadmap capacity expansion and income/valuation uplift, while addressing potential mandatory PUE requirements under the proposed Digital Infrastructure Act,” JP Morgan suggests.
An AEI that delivers higher PUE would add between 2.9% to 5% more to distributions per unit (DPU) by FY2028, JP Morgan estimates, underpinned by a 114%-173% uplift in net property income (NPI) on redevelopment costs of $251 million to $320 million, based on 11-14MW of capacity and an ROI of 6.8%-8.1%.
“If KDCREIT secures 15% additional power, the accretion will rise to 4.1% to 6.5%,” JP Morgan further estimates.
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During the interim, JP Morgan believes that the income loss from SGP 1 which contributed $16.5 million in gross rental income (GRI) in FY2025 compared to total GRI of $441.36 could be offset by raising the amount of management fees in units to 55% from 27%.
KDC SGP 1’s performance has lagged the REIT's other Singapore assets. “We believe KDC SGP 1’s redevelopment will help close the gap. The proposed redevelopment is comfortably within KDCREIT's 10% development limit relative to its $6.3 billion portfolio. While management may consider divesting a stake to de-risk execution, we believe KDCREIT should pursue the redevelopment on its own balance sheet, given tight occupancies and elevated Singapore data centre demand,” JP Morgan says.
The US bank has an overweight rating for Keppel DC REIT; it has raised its end-June 2027 target to $2.60 from $2.55 previously; and has also raised DPU for 2026 and 2027 by 5.8% and 5% respectively due to lower interest costs and higher Singapore income from reversions and acquisitions.
