He adds that the REIT manager is considering potentially acquiring a hyperscale data centre in Frankfurt, Germany, with a net property income (NPI) yield of 6% and a weighted average lease expiry (WALE) of 10 years in 1HFY2026 ending Sept 30.
The analyst also notes that the REIT could see improved portfolio occupancy of 97.7% in the 2HFY2026, 2.5 percentage points higher y-o-y, due to a scheduled ramp-up of existing tenants and the addition of new tenants.
“Occupancy at CA1 is expected to increase by 7.5 percentage points to 99% as major leases fully ramp up in 2HFY2026. Occupancy at CA3 is projected to reach 100% by 4QFY2026 after securing new tenants [while] occupancy at SG1 is likely to improve by 2.6 percentage points to 96% by FY2027 as new leases commence,” Koh points out. CA1 and CA3 refer to the REIT’s data centres in Sacramento, California, while SG1 refers to its data centre in Serangoon North.
Koh also likes NTT DC REIT’s prospects, given that its largest tenant is a Fortune 100 US electric vehicle (EV) company, which accounted for 29.9% of its base rent as of September 2025. He notes that the tenant’s leases have a WALE of eight years and rental escalation of 3%. The company is also expanding its autonomous taxi service to new geographical areas and has unveiled a new product, an autonomous humanoid robot, which could create more demand for NTT DC REIT’s data centre capacity.
See also: UOBKH initiates coverage on Reclaims Global with ‘buy’ recommendation and target price of 56 cents
In addition to his “buy” call, Koh has a target price of US$1.42 ($1.83), which represents a 42% upside to the REIT’s IPO and last-closed price of US$1 at Jan 12.
The REIT currently provides the highest distribution per unit (DPU) yield at an annualised 7.2% for FY2026 and 8% for FY2027, compared to Digital Core REIT’s 6.6%, Keppel DC REIT’s 4.6% and Mapletree Industrial Trust’s (MINT) 6.1%.
Koh expects the REIT’s DPU to come in at 5.4 US cents for FY2026 and 8 US cents for FY2027.
As at 11.33am, units in NTT DC REIT are trading 1 cent higher or 1% up at US$1.01.
