Keppel DC REIT (KEPE.SI / KDCREIT SP)

Transcription

1 Asia Pacific/Singapore Equity Research REITs Rating OUTPERFORM* [V] Price (12 Jan 15, S$) 0.96 Target price (S$) 1.10¹ Upside/downside (%) 14.6 Mkt cap (S$ mn) (US$ 636.6) Enterprise value (S$ mn) 1,167 Number of shares (mn) Free float (%) week price range ADTO - 6M (US$ mn) 7.6 *Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector. ¹Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix). Share price performance Dec-14 Price (LHS) Research Analysts Yvonne Voon yvonne.voon@credit-suisse.com Daniel Lim daniel.lim@credit-suisse.com Rebased Rel (RHS) The price relative chart measures performance against the FTSE STRAITS TIMES IDX which closed at on 12/01/15 On 12/01/15 the spot exchange rate was S$1.33/US$1 Performance Over 1M 3M 12M Absolute (%) Relative (%) -1.1 (KEPE.SI / KDCREIT SP) INITIATION Proxy to growing demand for data centres Initiate with an OUTPERFORM, with a DDM-derived target price of S$1.10, implying 21% total return. trades at 6.6% FY15E yield. Key risks include macroeconomic, competition, relatively short land tenure for some assets, interest rate and acquisition (dilution if the acquisition size is large) risks, among others. First of its kind in Asia: pure-play data centre REIT. consists of eight data centres: two each in Singapore and Australia, and one each in Malaysia, United Kingdom, Netherlands and Ireland, with an aggregate lettable area of 509,913 sq ft and an S$1.022 bn appraised value. Proxy to growing data usage and demand for DCs. Data centre sector fundamentals look favourable, with demand expected to continue its upward trajectory supported by growing data creation and storage needs, pick-up in outsourcing of data centre requirements, cloud-computing and compliance/ regulatory requirements. Meanwhile, supply outlook looks supportive of rental growth given the limitations such as high barriers to entry (high upfront costs, track record, technical know-how). According to BroadGroup, Keppel DC REIT's assets are in markets which exhibit favourable sector dynamics. Growth drivers: organic reversions and acquisitions. With a relatively long weighted average lease expiry (WALE) of 7.8 years by leased lettable area (some longer leases have 2-4% per annum step ups), the visibility of its rental income stream is high, making a defensive play. Further earnings upside potential may come from acquisitions, with ROFR from Sponsor (Keppel T&T) and iseek Communications. Its 27.8% gearing implies ~S$200 mn debt headroom assuming 40% leverage. Financial and valuation metrics Year 12/13A 12/14E 12/15E 12/16E Net property income (S$ mn) EBITDA (S$ mn) n.a Net attributable profit (S$ mn) Distributable income (S$ mn) n.a EPS (CS adj.) (S$) n.a Consensus EPS (S$) EPS growth (%) n.a. n.a P/E (x) n.a DPU (S$) n.a Change from previous DPU (%) DPU yield (%) n.a P/Book (x) n.a EV/EBITDA (x) n.a ROE (%) n.a Net debt/equity (%) n.a Source: Company data, Thomson Reuters, Credit Suisse estimates. DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION Client-Driven Solutions, Insights, and Access

2 CRCT SGREIT LMRT MAGIC CMT MCT SPH REIT FCT CCT* KepREIT FCOT OUECT Kep DC REIT^ MLT AREIT SB REIT Cambridge Cache AAREIT Viva MINT Sabana PLife REIT 13 January 2015 Focus charts and tables Figure 1: Geographical breakdown by asset value* Ireland 10% Netherlands 13% UK 8% Malaysia 4% Australia 24% Singapore 41% * Includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data as at 30 September Figure 3: Wholesale co-location rent 's assets are located in markets which exhibit favourable data centre sector fundamentals US$ psf lettable Singapore area/month KL Amsterdam Sydney London Dublin F2015F2016F2017F2018F Source: BroadGroup E CAGR: Sydney: 5.0% SG: 4.9% London: 4.6% Amsterdam: 4.6% Dublin: 3.8% KL: 5.8% Figure 2: Breakdown of individual assets by asset value* Almere DC 13% GV7 DC 7% Basis Bay DC 4% iseek DC 3% Citadel 100 DC 10% Gore Hill DC 21% S25 26% T25 16% * Includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data as at 30 September Figure 4: WALE versus other S-REITs WALE (years) Retail Office DC Industrial Healthcare Source: Company data, Credit Suisse estimates 9.9 Figure 5: Summary of 's initial portfolio Property Location GFA Lettable No. Occupancy Appraised Cap Lease type/ WALE^ area of value# rate arrangement sq ft sq ft "customers" % S$ mn S$ psf ^ % (years) S25 Singapore 225, , , Keppel lease / 3.5 Co-location T25 Singapore 106,726 36, , Keppel lease / 2.0 Co-location Gore Hill DC* Sydney 127,283 90, , Triple-net / 10.3 Co-location iseek DC Brisbane 28,955 12, , Double-net lease 11.9 Basis Bay DC~ Selangor 88,600 48, Double-net lease 2.7 GV7 DC London 34,848 24, , Triple-net lease 12.5 Almere DC Amsterdam 138, , , Double-net lease 14.1 Citadel 100 DC Dublin 125,044 68, , Co-location 2.3 Total 875, , , * One customer on triple-net lease, two customers on co-location for Gore Hill DC. ^ lettable area basis. # Appraised value refers to the average of the two independent valuations conducted by the respective Independent Valuers for each asset. ~ Data includes 1% interest in Basis Bay DC held by the Basis Bay Vendor; is expected to hold a 99% interest. "Customers" include both tenants and end-users, and for S25 and T25 (in the present context), this is on a pass-through basis. iseek Lease treated as a double-net lease for the purpose of this report. Source: Company data as at 30 September (KEPE.SI / KDCREIT SP) 2

3 Proxy to growing demand for data centres First of its kind in Asia: Pure-play data centre REIT will be Asia's first pure-play data centre (DC) REIT, with an initial portfolio of eight data centres in six countries across Asia Pacific and Europe: two in Singapore, two in Australia, and one each in Malaysia, United Kingdom, Netherlands and Ireland. The initial portfolio will have an aggregate lettable area of 509,913 sq ft with a S$1.022 bn appraised value. With limited market comparables, there may be a tendency to group along with the other nine industrial S-REITs, but we believe should be viewed independently given the 'higher specifications' and the significantly more challenging barriers to entry for a data centre. is defensive, backed by a long weighted average lease expiry (WALE) of 7.8 years (by leased lettable area). Proxy to growing data usage and demand for DCs provides a unique exposure to the favourable industry fundamentals of the data centre market, which is still in its growth phase. Demand is expected to continue its upward trajectory with growing data creation and storage needs, as well as the pick-up in outsourcing of data centre requirements, cloud-computing and compliance/regulatory requirements on data security. Meanwhile, supply outlook looks supportive of rental growth given the limitations like high barriers to entry (high upfront costs, and technical know-how). According to BroadGroup research, 's assets are located in markets which exhibit favourable data centre sector fundamentals. Growth drivers: Organic reversions and acquisitions The double-net and triple-net leases at a typical data centre tend to be longer in tenure (15 to 20 years) while the co-location arrangements tend to be shorter. With 's relatively long portfolio WALE, this provides with a higher visibility of the rental income stream. Further earnings growth may come from asset enhancement initiatives (unutilised GFA at T25, Citadel 100 DC and Basis Bay DC) and increases in S25's and Citadel 100 DC's occupancies. Inorganic growth could come from acquisitions from Sponsor, Keppel T&T (including T27 in Singapore and Almere Data Centre 2 in Amsterdam), and also from iseek Communications in Australia. 's investment mandate: to principally invest, directly or indirectly, in a diversified portfolio of income-producing real estate assets, which are primarily used for data centre purposes, as well as real estate-related assets with an initial focus on Asia Pacific and Europe. Gearing of 27.8% implies some S$200 mn debt headroom for acquisition assuming a 40% leverage. Initiate with a OUTPERFORM Our DDM-derived target price of S$1.10 implies a potential 15% upside (21% total return) from current level. currently trades on 6.6% FY15E yield, and we believe there may be future upside from incremental acquisitions. Key risks include macroeconomic, competition, relatively short land tenure for its Singapore, Brisbane and Dublin assets, interest rate and acquisition (dilution if the acquisition size is large) risks, among others. 's initial portfolio will consist of eight data centres across six countries, with an appraised value of S$1.022 bn provides a unique play on the data centre market, which is in its growth phase Its long 7.8-years WALE provides earnings visibility with per annum step-up clauses in most of its leases Inorganic growth to come from acquisition Keppel DC REIT has a ROFR from Sponsor, Keppel T&T and iseek Communications in Australia Initiate coverage on Keppel DC REIT with an OUTPERFORM and target price of S$1.10 implies a potential 15% upside, implying a total return of 21%. (KEPE.SI / KDCREIT SP) 3

4 KEPE.SI / KDCREIT SP Price (12 Jan 15): S$0.96, Rating:: OUTPERFORM [V], Target Price: S$1.10 Target price scenario Scenario TP %Up/Dwn Assumptions Upside Central Case Downside Income statement (S$ mn) 12/13A 12/14E 12/15E 12/16E Gross revenue Property expenses Real estate taxes Net property income Other income Asset mgmt. fees (exp. item) Trustee fees (exp. item) Other expenses EBITDA Net interest expense/(inc.) Investment income Associates/JV Recurring PBT Taxes Revaluations Net profit (Credit Suisse) Non-tax deductible exp. (4.3) (0.8) 0.2 Tax deductible expenses Other adj. to distrib. inc. (4.0) (4.0) (4.2) Distributable income Cash flow (S$ mn) 12/13A 12/14E 12/15E 12/16E EBIT Net interest Tax paid Working capital (14.8) 0.1 (0.6) Other cash & non-cash items (7.3) (5.3) (4.5) Operating cash flow Capex (22.4) (4.5) (4.5) Net property acq. (686.5) Other investment/(outflows) Investing cash flow (708.9) (4.5) (4.5) Equity raised Dividends paid (55.3) (55.3) (57.5) Net borrowings Other financing cash flow (34.1) (13.2) (13.4) Financing cash flow (68.5) (67.9) Adjustments (0.27) Net change in cash 7.4 (2.7) (0.0) Balance sheet (S$ mn) 12/13A 12/14E 12/15E 12/16E Cash & cash equivalents Short-term investments Current receivables Other current assets Current assets Property, plant & equip. Investment properties 1,061 1,071 1,090 Investment in Associates/JV Other investments Other non-current assets Non-current assets 1,062 1,072 1,091 Total assets 1,096 1,103 1,123 Accounts payable Short-term debt 3.8 Current provisions Other current liabilities Current liabilities Long-term debt Non-current provisions Other non-current liab. Non-current liabilities Total liabilities Unitholder funds Capital employed 1,089 1,101 1,120 Key earnings drivers 12/13A 12/14E 12/15E 12/16E Singapore Australia Malaysia UK Europe Per share data 12/13A 12/14E 12/15E 12/16E Shares (wtd avg.) (mn) EPS (Credit Suisse) (S$) DPU (S$) BVPS (S$) NAV per share (S$) Key ratios and 12/13A 12/14E 12/15E 12/16E valuation Growth(%) Gross revenue (0.27) (0.35) 2.72 Net property income (2.18) (1.79) 2.64 Net profit (6.44) (2.53) 2.69 Distributable income DPU Margins (%) NPI margin Pre-tax profit margin Net profit margin Valuation metrics (x) P/E DPU yield (%) P/B EV/EBITDA Profitability (%) ROE ROA Credit ratios Net debt/equity (%) Net debt/ebitda (x) Debt/asset (%) Interest cover (x) Source: Company data, Thomson Reuters, Credit Suisse estimates. 12MF P/E multiple Source: IBES 12MF P/B multiple (KEPE.SI / KDCREIT SP) 4

5 First of its kind in Asia: Pure-play data centre REIT Initial portfolio consists of eight quality data centres across six countries will be Asia's first pure-play data centre (DC) REIT, with an initial portfolio of eight data centres in six countries across Asia Pacific and Europe: two in Singapore, two in Australia, and one each in Malaysia ( to own 99% of Basis Bay DC, with Basis Bay holding remaining 1% interest), United Kingdom, Netherlands and Ireland. The initial portfolio will have an aggregate lettable area of 509,913 sq ft with an aggregate appraised value (average of two independent valuations) of S$1.022 bn as at 30 September SGX-listed Keppel Telecommunications & Transport Ltd (Keppel T&T, Not Rated, KTEL.SI), is the sponsor of (the "Sponsor") and is primarily involved in two businesses, logistics and data centre, with operations in Asia Pacific and Europe. has eight data centre assets in six countries, with an aggregate appraised value of S$1.022 bn Figure 6: Summary of 's portfolio breakdown by asset value Netherlands (13.0% of portfolio) 6. Almere Data Centre, Almere (Appraised value: S$131.6mn; 1 tenant) United Kingdom (7.5% of portfolio) 7. GV7 Data Centre, London (Appraised value: S$77.0mn; 1 tenant) Ireland (10.1% of portfolio) 8. Citadel 100 Data Centre, Dublin (Appraised value: S$102.8mn; 5 tenants) Malaysia (4.3% of portfolio) 3. Basis Bay Data Centre, Cyberjaya^ (Appraised value: S$43.3.0mn; 1 tenant) Singapore (40.8% of portfolio) 1. S25 (Appraised value: S$262.8mn; 18 tenants) 2. T25 (Appraised value: S$162.0mn; 4 tenants) 3 1,2 Australia (24.4% of portfolio) 4. Gore Hill Data Centre, Sydney (Appraised value: S$210.9mn, 3 tenants) 5. iseek Data Centre, Brisbane (Appraised value: S$31.5mn, 1 tenant) 4 5 ^ Includes1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data Unique proposition to a very specific 'missioncritical', defensive and high-specs asset class Data Centre 101: Not the usual "industrial" asset As is the first of its kind in Asia, we would like to highlight some key characteristics of a data centre and why they should not be thought of as just an "industrial asset". Due to the lack of comparables in the market, there may be a tendency to group Keppel DC REIT along with the other nine industrial REITs in Singapore, on the assumption that a data centre is typically a "square box" type of structure, nothing fancy, in a non-prime location (usually industrial/business parks type of location). A data centre should not be thought of as just another industrial asset due to their higher technical specifications, design and mission-critical nature (KEPE.SI / KDCREIT SP) 5

6 Figure 7: Summary of asset exposure of the existing nine Singapore industrial REITs 100% 90% 80% 70% 60% 19% 15% 32% 4% 18% 58% 10% 4% 13% 48% 9% 52% 3% 39% 50% 40% 30% 20% 10% 0% 27% 100% 100% 78% 3% 12% 58% 17% 58% 42% 36% 23% 19% 5% Viva Sabana Soilbuild AREIT MINT AAREIT Cambridge MLT Cache Hi-tech Biz parks Industrial Flatted factories Logistics & warehouse Others Source: Company data However, given the 'higher specifications' and the significantly more challenging barriers to entry for a data centre, we believe that should be viewed as a unique REIT and not be directly compared to the other nine industrial S-REITs. As summarised in Figure 7 above, the nine industrial REITs currently listed in Singapore largely consist of the usual industrial asset classes including business and science parks, warehouses, light industrial, hi-tech industrial and flatted factories. Although within these names, we note that there are a few of them with pockets of data centre exposures, including: Some industrial S-REITs have data centre exposures, but it is a reasonably small percentage of their portfolio MINT (Tata Communications Exchange, Equinix and 19 Tai Seng Drive classified under Hi-Tech industrial estimated to be c. 5-6% of portfolio by valuation); AREIT (Kim Chuan Complex and 38A Kim Chuan Road classified under Hi-tech industrial, although Pioneer Hub, shared by Equinix and other tenants, is classified under Logistics estimated to be 7% of portfolio by valuation); Other smaller market cap names like Sabana and AAREIT, although exposure as a percentage of portfolio is small, i.e., less than 5% of portfolio. We detail below some of the key differentiating factors/characteristics of a data centre, and why we believe there is a lot more "value" in data centres, compared to the other existing industrial asset classes. Data centres versus other industrial asset classes: A quick comparison Compared to some of the other industrial assets, data centres are more specialised in nature. As it houses mission-critical networking and computer equipment, the level of infrastructure required is therefore more "high-specs" to ensure a highly reliable, secure environment, that is equipped with uninterrupted power (and cooling along with it) and network communication connection. The barriers to entry are therefore meaningfully higher, compared to the usual business parks, warehouses, industrial buildings or factories. The usual tenants of a data centre include organisations such as financial institutions, government agencies, telecommunication service providers, software and internet companies, cloud computing enterprises, and more. Essentially, with every use of internet (as more s are created at work, or more pictures, news, and more are loaded onto the online platform), or even increased requirement/need for backing up data (for business continuity or compliance), all these lead to demand for data centres. More information on a data centre in Appendix III. Barriers to entry for other industrial-type asset classes tend to be significantly lower compared to a data centre (KEPE.SI / KDCREIT SP) 6

7 Figure 8: Key features of a data centre Feature Function Uninterruptible Power System (UPS)/generators Cooling equipment Location/accessibility Raised flooring Fire suppression Internet connectivity Security Building and environmental monitoring systems Track record and quality Source: Company data, Credit Suisse research Not everyone can build a data centre Sufficient generators and UPSs to ensure instantaneous, consistent and continuous power supply in the event of outages from local power grids Computer equipment generates a lot of heat, and it is crucial to manage the temperature of the data centre Ideally located near major markets and its customers, with good accessibility. At the same time, accessibility to power grid also enhances the location profile (and of course cost of operations as well and items like utility prices are considered). Other considerations include risk of natural disasters or weather events given their importance. Elevated floor to allow the passage of mechanical and electrical services Systems to detect, contain and respond promptly to any fire outbreaks Availability of sufficient physical telco cables to allow direct connectivity Due to the sensitivity of data storage, security (high levels of it) is therefore one of the dominant features of a data centre Hardware and software to monitor and manage items like temperature, humidity, security, and more. As telecommunications infrastructure is critical to the operations of a data centre, redundancy of infrastructure and multiple carriers are vital to mitigate risks. In addition, in-depth knowledge on designing a data centre allows for better efficiencies Compared to the relatively simpler structure of the usual factories, business parks, industrial buildings or even warehouses, the high specifications and substantial upfront capital expenditure required raises the barriers to entry for the data centre segment. In addition to the high cost of construction, tenants generally look out for quality and prefer operators/developers with proven track record, given that the majority of usage of the data centre is mission-critical. Worth noting that the "Net Lettable Area efficiency" for a typical data centre is generally low as well due to the extensive space required to house mechanical and engineering facilities, coolers, back-up generators, UPSs and others. Significant upfront costs and tenants' preference for operators/developers with proven track record provide high barriers to entry for aspiring new entrants Figure 9: Average rents of a data centre and other industrial asset classes Average rents Average capital (S$ psf lettable area/ month) values (S$ psf lettable area) Data centre* ,400 Business parks Flatted factories Warehouses Light industrial Hi-tech Figure 10: Comparable mechanical and electrical fit out costs (ex-land and basic shell of building) of data centres, retail, Grade A office and industrial property assets US$ psf 2,500 2,000 2,000 1,500 1,200 1, Data centres Retail Grade A offices Industrial Average: 1, * Capital values: Average of S25, T25 S25 includes office component in the lettable area. Source: Company data (data from AREIT, MINT, MLT), BroadGroup Source: BroadGroup, Company data (KEPE.SI / KDCREIT SP) 7

8 : A quality portfolio Portfolio summary has eight assets strategically located in key data centre hubs three in Asia, three in Europe and another two in Australia in markets which exhibit favourable data centre sector fundamentals. Singapore and Australia are its two largest assets, with two assets in each country, making up 65% of total portfolio by asset value. In addition, we understand that all of 's data centres are of high specifications. More details are summarised in Appendix II. Figure 11: Summary of 's initial portfolio Property Location GFA Lettable No. Occupancy Appraised Cap Lease type/ WALE^ area of value# rate arrangement sq ft sq ft "customers" % S$ mn S$ psf ^ % (years) S25 Singapore 225, , , Keppel lease / 3.5 Co-location T25 Singapore 106,726 36, , Keppel lease / 2.0 Co-location Gore Hill DC* Sydney 127,283 90, , Triple-net / 10.3 Co-location iseek DC Brisbane 28,955 12, , Double-net lease 11.9 Basis Bay DC~ Selangor 88,600 48, Double-net lease 2.7 GV7 DC London 34,848 24, , Triple-net lease 12.5 Almere DC Amsterdam 138, , , Double-net lease 14.1 Citadel 100 DC Dublin 125,044 68, , Co-location 2.3 Total 875, , , * One customer on triple-net lease, two customers on co-location for Gore Hill DC. ^ lettable area basis. # Appraised value refers to the average of the two independent valuations conducted by the respective Independent Valuers for each asset. ~ Data includes 1% interest in Basis Bay DC held by the Basis Bay Vendor; is expected to hold a 99% interest. "Customers" include both tenants and end-users, and for S25 and T25 (in the present context), this is on a pass-through basis. iseek Lease treated as a double-net lease for the purpose of this report. Source: Company data as at 30 September 's portfolio is currently 93.5% occupied by 34 customers, spread over three different kinds of leases: Keppel lease, double/triple-net leases and co-location arrangements. Keppel Lease: Refers to the S25 Lease and the T25 Lease entered into by Keppel DC REIT with the S25 Lessee and T25 Lessee in relation to S25 and T25, respectively. Due to the pass-through nature of the Keppel Leases, will substantially enjoy the benefits and assume the liabilities of the underlying colocation arrangements entered into by the Keppel Leases and the underlying endusers. Double-net lease: Refers to a lease where the tenant pays for rent, is responsible for facilities management and satisfies at least one of the four property-related expenses such as property tax, or expenses for building insurance (please refer to details in Figure 12). Triple-net lease: Refers to a lease where the tenant pays for rent, is responsible for facilities management and satisfies all of the four property-related expenses (i.e., gross rental income = net property income). Co-location arrangements: Typically entered into by end-users who utilise colocation space for the installation of their servers and other mission-critical IT equipment. In the case of, end-users with co-location arrangements pay for rent and all property-related expenses are borne by. Keppel DC REIT is usually responsible for facilities management as well. (KEPE.SI / KDCREIT SP) 8

9 13 January 2015 (KEPE.SI / KDCREIT SP) 9 Figure 12: Summary of responsibilities of as owner and/or lessor and the responsibilities of the lessees or end users in the lease and colocation arrangements for the various properties Asset Lease arrangement Description Property tax Building insurance S25 T25 Gore Hill DC (one of three tenants) Gore Hill DC (for one of the two remaining tenants) Keppel Lease / Colocation arrangements (1) (2) Keppel Lease / Colocation arrangements (1) (2) - Lessee: Pays rent and all expenses recharged to Lessor - Lessor: Responsible for facilities management, which will be outsourced to Digihub - Lessee: Pays rent and all expenses recharged to Lessor - Lessor: Responsible for facilities management, which will be outsourced to Datahub Triple-net lease (4) - Lessee: Pays share of all outgoings; responsible for facilities management in their space Co-location arrangements - End-users: Pays rent (1) - Owner: Responsible for facilities management (which will be outsourced to iseek-kdc) and all expenses iseek DC Double-net lease (3) (5) - End-users: Pays all outgoings except building insurance; and responsible for facilities management Basis Bay DC Double-net lease (3) - Lessee: Pays all outgoings except building insurance and property tax; and responsible for facilities management GV7 DC Triple-net lease (4) - Lessee: Pays all outgoings; responsible for facilities management Almere DC Double-net lease (3) - Lessee: Pays all outgoings except building insurance and property tax; responsible for facilities management Citadel 100 DC Co-location arrangements - End-users: Pays rent (1) - Owner: Responsible for facilities management and all expenses Responsibilities of Lessor / Owner Facilities Management Day-to-day maintenance Maintenance operating expenditure Refresh capital expenditure ) Co-location arrangements = typically entered into by end-users who utilise co-location space for installation of their servers and other IT equipment. In the case of, endusers with co-location arrangements pay for rent and all the Property-Related Expenses are borne by (usually responsible for facilities management in respect of such colocation arrangements). (2) Refer to S25 Lease and T25 Lease. Given the pass-through nature, effectively enjoys substantial benefits and assumes the liabilities of the underlying co-location arrangements; (3) Double-net lease refers to lease where tenant pays rent, responsible for facilities management and satisfies at least one of the 4 property-related expenses; (4) Triple-net lease is where the tenant pays for rent, facilities management and satisfies all the property-related expenses; (5) The iseek Lease is legally a co-location arrangement. However, the terms thereof are structured so as to mimic the economic effects of a double-net lease and the responsibilities which iseek Communications bears under the iseek Lease are those it would bear if it were the lessee under a double-net lease and for the avoidance of doubt, the iseek Lease is treated as a double-net lease and not a co-location arrangement for the purpose of this report. Source: Company data.

10 CRCT SGREIT LMRT MAGIC CMT MCT SPH REIT FCT CCT* KepREIT FCOT OUECT Kep DC REIT^ MLT AREIT SB REIT Cambridge Cache AAREIT Viva MINT Sabana PLife REIT 13 January 2015 Figure 13: 's assets are located in markets which exhibit favourable data centre sector fundamentals: BroadGroup research's summary of market positioning (Scale: 1-5 with 5 being highest score) Local demand International Low competition demand Singapore Growth opportunities Australia Malaysia UK Netherlands Ireland Source: BroadGroup Figure 14: Geographical breakdown by asset value* Ireland 10% Netherlands 13% UK 8% Singapore 41% Figure 15: Breakdown of individual assets by asset value* Almere DC 13% GV7 DC 7% Citadel 100 DC 10% S25 26% Malaysia 4% Australia 24% * Includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data as at 30 September Defensive portfolio with long WALE Basis Bay DC 4% iseek DC 3% Gore Hill DC 21% T25 16% * Includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data as at 30 September is defensive, backed by a long weighted average lease expiry (WALE) profile, mitigating vacancy risks. Given the large fit-out costs required by the tenants (server costs, etc.), retention rate tends to be high once they have decided to sign on the lease. Portfolio WALE as at 30 September 2014 is 5.6 years by net property income (NPI) for the month of September 2014 on a cash basis (7.8 years by leased lettable area), with a 97.8% customer retention rate. One of the longest WALE among S-REITs: WALE of 7.8 years by leased lettable area, and 5.6 years by net property income Figure 16: WALE of 5.6 years (7.8 years by leased lettable area as at 30 September 2014) WALE (years) Retail Office DC Industrial Healthcare * CCT's WALE includes the long-term lease for Raffles City Singapore hotels: Fairmont and Swissötel. ^ WALE by NPI on a cash-basis for the month of September Source: Company data 9.9 Figure 17: Weighted average lease expiry profile by leased lettable area and rental income* % of lease expiry by leased lettable area by rental income * For the month of September 2014, includes the 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data as at 30 September (KEPE.SI / KDCREIT SP) 10

11 Figure 18: Long land lease expiry*, with a weighted average remaining land tenure by lettable area of 35.6 years by lettable area Figure 19: Gross revenue* breakdown by lease and colocation arrangement (includes Keppel Lease) Double/Triple-net leases 24.4% Weighted average land tenure of 35.6 years by lettable area 54.7% Freehold or land tenure of >150 years 45.3% Co-location arrangements 75.6% * By appraised value as at 30 September Source: Company data. Figure 20: Rental income* by property (for the month of September 2014) * Based on rental income for the month of September 2014 (includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor). Source: Company data Figure 21: Portfolio leased lettable area* by trade (as at 30 September 2014) Almere DC 8.9% GV7 DC 4.9% Citadel 100 DC 12.4% S % Telecommunications 28.4% IT services 38.0% Basis Bay DC 3.8% iseek DC 4.6% Gore Hill DC 20.7% T % Financial services 23.6% Internet enterprise Corporate 7.7% 2.3% * Includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data * Includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data Due to the sensitivity of information stored in a data centre (hence requiring a higher level of security), is unable to disclose its tenants' profile. However, of the top ten tenants, which make up about 88.4% of rental income for the month of September 2014, we understand them to be high profile names including companies listed on the NASDAQ, NYSE, Euronext, ASX, SGX as well as a statutory board of the Singapore government. Some other tenants include an international provider of outsourcing solutions in IT and managed data centre services across Asia Pacific and Europe, and a businessonly internet service provider specialising in mission-critical data networks which provides business grade internet and data centre server co-location services to businesses across Australia. Top-ten tenants account for 88.4% of rental income, but due to sensitivity of data centre, tenants' profiles are not disclosed (KEPE.SI / KDCREIT SP) 11

12 Figure 22: Diversified customer base rental income* breakdown for the month of September 2014 by trade Financial services 13.0% Corporate 4.1% Telecommunications 15.2% IT services 41.9% Figure 23: Top ten customers (based on rental income* for the month of September 2014) Customer Trade sector % of rental income A Internet enterprise 25.7 B IT services 20.9 C Telecommunications 8.8 D IT services 8.7 E Financial services 5.4 F IT services 4.9 G Telecommunications 4.6 H IT services 3.8 I IT services 3.1 J Financial services 2.6 Top Others 11.6 Internet enterprise 25.8% * Includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data * Includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data Figure 24: Selected key considerations of data centre demand and supply overview of each of the six locations has a presence in Ease of doing business Global ranking (2013) Accessibility to power and security of energy Global ranking (of 124 countries) Climate risk index for Global ranking* Broadband penetration Fixed broadband Wireless broadband Australia 11th Australia 26th Australia 38th Australia 29th 6th Ireland 15th Ireland 17th Ireland 135th Ireland 35th 19th Malaysia 6th Malaysia 71st Malaysia 86th Malaysia 74th 83rd Netherlands 28th Netherlands 33rd Netherlands 70th Netherlands 2nd 20th Singapore 1st Singapore 62nd Singapore 174th Singapore 25th 1st UK 10th UK 11th UK 65th UK 10th 14th US 37th US 31st US 20th 9th * The higher the number, the better (Qatar has the highest rank at 178 th ). Source: BroadGroup Singapore: S25 and T25 As noted earlier in Figure 13, Singapore is one of the markets identified by BroadGroup to have strong fundamentals, with healthy growth opportunities supported by good telecommunications, financial and trading infrastructure, as well as a conducive operating environment with the backing from the government, as Singapore seeks to position itself as an economic hub in the region. The country is also among the best positioned on the climate risk front. Demand for data centres is supported by the growing number of multinational and regional organisations, which often use Singapore as their headquarters. Singapore is currently home to a number of Southeast Asia's data centre capacity, including the likes of Google, Tata, Equinix and Digital Realty both Equinix and Digital Realty have their largest Asia Pacific facility in Singapore. According to data by BroadGroup, there is currently about 1.8 mn sq ft of data centre space in Singapore, which implies that commands some 8% of market share. has two assets in Singapore, S25 and T25, commanding some 8% market share (KEPE.SI / KDCREIT SP) 12

13 Figure 25: Total data centre space in Singapore (sq ft) sq ft 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 - Source: BroadGroup CAGR 2007A-13A = 11.1% 2007A 2008A 2009A 2010A 2011A 2012A 2013A For S25, will grant a lease of 10+5 years lease to S25 Lessee, and under the S25 Lease, the rent payable to comprises a fixed rent component, (S$5 mn per annum, 3% annual escalation), and a variable rent component (99% of the EBITDA after deducting the fixed rent and operating expenses) for S25. Figure 26: S25 summary of asset details Details Six-storey main building with a five storey annexe Address 25 Serangoon North Avenue 5, Singapore Land title Leasehold (expiring 30 Sept 2025, with option to extend another 30 years) Completion Main building 1996 (converted for use as a data centre in 2001, and major AEI works for high specs data centre in ), Annexe Occupancy 86% GFA (sq ft) 225,945 Lettable area (sq ft) 109,574 Appraised value (S$ mn) No. of end-users and WALE 18 end users. WALE: 3.5 years (by leased lettable area) Lease type Keppel Lease / Co-location arrangement Facility manager Digihub Source: Company data as at 30 September 2014 For T25, will grant a lease of 10+5 years to a T25 Lessee, and under the T25 Lease, the rent payable to comprises a fixed rent component, (S$3 mn per annum, 3% annual escalation), and a variable rent component (99% of the EBITDA after deducting the fixed rent and operating expenses) for T25. Figure 27: T25 summary of asset details Details Five-storey main building with a four storey annexe Address 25 Tampines Street 92, Singapore Land title Leasehold (expiring 31 July 2021, with an option to extend for 30 years) Completion Main building 1991 (extensive retrofitting in 2010 for use as a data centre), Annexe 2011 Occupancy 100% GFA (sq ft) 106,726 Lettable area (sq ft) 36,888 Appraised value (S$ mn) 162 No. of end-users and WALE Four end-users. WALE: 2.0 years (by leased lettable area) Lease type Keppel Lease / Co-location arrangement Facility manager Datahub Source: Company data as at 30 September 2014 (KEPE.SI / KDCREIT SP) 13

14 Australia: Gore Hill DC (Sydney) and iseek DC (Brisbane) BroadGroup has Australia as one of the best data centre markets in terms of market fundamentals, scoring full points on the demand and growth opportunities front, in a market where competition is relatively low (see Figure 13 earlier). Sydney is the largest data centre market in Australia, leveraging its status as a key hub (demand coming from multi-nationals, financial institutions and global providers of data centres). Meanwhile, in Brisbane, although demand is currently dominated by local providers, there is scope for growth over time as larger providers and global players such as Fujitsu have started to build facilities in the city, though still small in scale, in comparison to Sydney. Overall demand in Australia has also been driven by the growing trend of outsourcing of data centre requirements, where the benefits of such a strategy are better understood by corporations particularly in more mature markets. Demand for data centres in Australia has also been driven by the growing trend of outsourcing has one DC in Sydney and one in Brisbane Figure 28: Total data centre space in Australia (sq ft) sq ft 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 0 Source: BroadGroup CAGR 2007A-13A = 14.8% 2007A 2008A 2009A 2010A 2011A 2012A 2013A Gore Hill DC is located on one of Sydney's main power and data arteries and is located some nine kilometres north west of Sydney's CBD. Of the space at Gore Hill DC, 50% is leased on a triple-net basis to one of three customers, under a 15-year lease commencing 19 September 2011 subject to a rental escalation of 3.5% per annum excluding market review dates (option to renew the lease three times, each time for a period of five years). The remaining 50% is under co-location arrangements with one of the two end-users and that we understand that one of the two end-users' co-location arrangements is ten years commencing on 1 August 2012 (with two options to extend by five years each) with rental escalation at 4% per annum. Figure 29: Gore Hill DC summary of asset details Details Four-storey data centre Address 5 Broadcast Way (South Gate) Artarmon, NSW 2064 Land title Freehold Completion 2011, additional capex works in 1H12 and mid-2013 Occupancy 100% GFA (sq ft) 127,283 Lettable area (sq ft) 90,955 Appraised value (S$ mn) No. of tenants/end-users and WALE One tenant /two end-users; WALE: 10.3 years (by leased lettable area) Lease type Triple-net lease (for one of three tenants) and colocation arrangements (one of two end-users) Facility manager iseek-kdc Source: Company data as at 30 September 2014 Meanwhile, over at iseek DC in Brisbane, under the iseek Lease, which is a co-location arrangement entered into by Securus Australia No. 1 Pty Limited (which will be wholly (KEPE.SI / KDCREIT SP) 14

15 owned by ) with iseek Communications, the property is leased to iseek Communications for a 20-year term for one level and year for the other level, where the rental payable is subject to an escalation of 4% per annum. As it is a double-net lease, the tenant basically pays for rent, outgoings of energy costs, facility management fees and others. as the landlord assumes the insurance and property tax as well as capex to the building. Figure 30: iseek DC summary of asset details Details Two-storey purposed-built data centre Address 2 Cycas Lane, Brisbane Airport, Queensland 4009, Land title Leasehold (expiring 29 June 2040, with an option to extend for 7 years) Completion 2010 Occupancy 100% GFA (sq ft) 28,955 Lettable area (sq ft) 12,389 Appraised value (S$ mn) 33.0 No. of tenants and WALE One tenant. WALE: 11.9 years (by leased lettable area) Lease type Double-net lease^ Facility manager iseek Communications ^ The iseek Lease is legally a co-location arrangement. However, the terms thereof are structured so as to mimic the economic effects of a double-net lease and the responsibilities which iseek Communications bears under the iseek Lease are those it would bear if it were the lessee under a double-net lease and for the avoidance of doubt, the iseek Lease is treated as a double-net lease and not a co-location arrangement for the purpose of this report. Source: Company data as at 30 September 2014 Malaysia: Basis Bay DC (Cyberjaya) Due to the relatively low cost of operations (low energy and labour costs), and the relative ease of getting land in Malaysia, coupled with support from the government (data centre industry is central to Malaysia's Economic Transformation Program), we have seen rising interest from global providers with corresponding interest from data centre users. Because of the relatively attractive positioning of Kuala Lumpur as a data centre location, there has been meaningful supply in recent years. So, while Kuala Lumpur as a market scores relatively strong on the growth opportunities front, the market remains relatively competitive with relatively low utilisation rates in the near term due to supply. Figure 31: Total data centre space in Malaysia (sq ft) sq ft 1,400,000 has one asset in Malaysia, solely leased to Basis Bay Services for a duration of 20 years 1,200,000 1,000,000 CAGR 2007A-13A = 12.7% 800, , , , A 2008A 2009A 2010A 2011A 2012A 2013A Source: BroadGroup That said, 's sole Malaysian asset is a single-tenanted property, with a double-net lease with Basis Bay Services for a duration of 20 years commencing from 15 June The asset is located in Cyberjaya, approximately 50 km south-west of Kuala Lumpur City Centre and 30 km north-west of the Kuala Lumpur International Airport. The 20-year term is split into four lease periods lasting for five years each, where the initial rent (KEPE.SI / KDCREIT SP) 15

16 is RM10.2 mn per annum with an escalation of 2% per annum for the first five years, which we believe will mitigate concerns on rental and vacancy risks. Figure 32: Basis Bay DC summary of asset details* Details Address Land title Completion April 2009 Occupancy 100% GFA (sq ft) 88,600 Lettable area (sq ft) 48,680 Appraised value (S$ mn) 45.0 No. of tenants and WALE Lease type Facility manager Four-storey data centre with an adjoining two-storey office building No. 4710, Jalan Cyber Point 5, Zone Flagship Cyberjaya Cyberjaya, Selangor Darul Ehsan Freehold One tenant. WALE: 2.7 years (by leased lettable area) Double-net lease Basis Bay Services * Includes 1% interest in Basis Bay DC which will be held by Basis Bay vendor. Source: Company data as at 30 September 2014 United Kingdom: GV7 DC (London) According to BroadGroup, the United Kingdom is one of the largest data centre markets in Europe, accounting for close to 25% of the Western European third party data centre market. Quite a significant amount of demand is driven by outsourcing (both corporate and government), but also by the rising requirement for data storage (compliance reasons) and the fact that the UK is a strong trading and financial hub, demand outlook for the market tends to be favourable. Figure 33: Total data centre space in the UK (sq ft) sq ft 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 0 Source: BroadGroup CAGR 2007A-13A = 8.7% 2007A 2008A 2009A 2010A 2011A 2012A 2013A 's sole asset in the UK is located in Greenwich View Place, a secure estate located on the Isle of Dogs, south of Canary Wharf, East London. GV7 is leased to a single tenant for a duration of years on a triple-net basis from 10 February has one asset in the UK, located in London, currently 100% leased to one tenant for years on a triple-net basis from 10 February 2012 (KEPE.SI / KDCREIT SP) 16

17 Figure 34: GV7 DC summary of asset details Details Address Source: Company data as at 30 September 2014 Netherlands: Almere DC (Almere) Two-storey data centre 7 Greenwich View Place, Millharbour Road, London E14 9NN Land title Leasehold (expiring 28 September 2183) Completion 1987 but refurbished in Occupancy 100% GFA (sq ft) 34,848 Lettable area (sq ft) 24,972 Appraised value (S$ mn) 77.7 No. of tenant and WALE One tenant. WALE: 12.5 years (by leased lettable area) Lease type Triple-net lease The Netherlands as a market ranks highly in terms of attracting both domestic and international demand due to its proximity to major European trading hubs, strong presence of US and multinational corporates, strong telecommunications infrastructure, with Amsterdam's reputation as the 'Internet hub' of Europe. Figure 35: Total data centre space in the Netherlands (sq ft) sq ft 2,500,000 has one asset in Almere, which is 100% leased to one tenant under a double-net lease basis 2,000,000 CAGR 2007A-13A = 9.1% 1,500,000 1,000, , A 2008A 2009A 2010A 2011A 2012A 2013A Source: BroadGroup owns one asset in the Netherlands in Almere. The Almere DC is located in the Sallandsekant business estate, some 50km away from the Schiphol airport and 135km from the Rotterdam harbour. The property is fully let to Borchveste Almere BV on a 20-year term to 17 April 2033 on a double-net basis. The initial annual ground rent is 5,814,899 with an annual indexation (by way of the consumer price index) for the first five years capped at 2.5%. Thereafter the annual indexation of the rent will be up to 2% of the then current annual rent. Figure 36: Almere DC summary of asset details Details Source: Company data as at 30 September 2014 Address Land title Completion 2008 Occupancy 100% GFA (sq ft) 138,219 Lettable area (sq ft) 118,403 Appraised value (S$ mn) 135 No. of tenants and WALE Lease type Three-storey semi-detached data centre and adjoins a mirrored building, with a parting wall between them Rondebeltweg 62 Sallandsekant Business Park, Almere Freehold One tenant. WALE: 14.1 years (by leased lettable area) Double-net lease (KEPE.SI / KDCREIT SP) 17

18 Ireland: Citadel 100 DC (Dublin) Dublin is a key data centre market in Ireland. Known to be Europe's cloud computing hub, Dublin's operating environment is conducive, with the government providing various initiatives such as tax advantages to improve the attractiveness for data centre industry players. As a result, Ireland has been able to attract many US-based IT and internet companies, financial institutions and pharmaceutical companies, with about 60-80% of third party data centre demand coming from the US. However, given the favourable operating environment, it has also attracted many data centre players, resulting in a relatively competitive market space. has one asset in Dublin, on colocation arrangements with existing five end-users, bringing occupancy to 73.7% as at Sept 2014 Figure 37: Total data centre space in Ireland (sq ft) sq ft 700, ,000 CAGR 2007A-13A = 4.3% 500, , , , , A 2008A 2009A 2010A 2011A 2012A 2013A Source: BroadGroup 's sole asset in Dublin is the Citadel 100 DC, which currently houses five customers occupying 73.7% of the space, under a co-location arrangement. Figure 38: Citadel 100 DC summary of asset details Details Two-storey detached data centre Address Citadel Unit , Citywest Business Park Land title Leasehold (expiring 11 April 2041) Completion 2000 but recently upgraded Occupancy 73.7% GFA (sq ft) 125,044 Lettable area (sq ft) 68,052 Appraised value (S$ mn) No. of end users and WALE Five end-users. WALE: 2.3 years (by leased lettable area) Lease type Co-location arrangement Source: Company data as at 30 September 2014 (KEPE.SI / KDCREIT SP) 18

19 Proxy to growing data usage and demand for DCs Favourable sector fundamentals As the first Asia data centre REIT, provides a unique exposure to the favourable industry fundamentals of the data centre market, which is still in its growth phase. Demand is expected to continue its upward trajectory with growing data creation and storage needs, as well as the pick-up in outsourcing, cloud-computing and compliance/regulatory requirements on data security. Meanwhile, supply outlook looks supportive of rental growth given the limitations such as high barriers to entry (high upfront costs, and technical know-how). Demand drivers Growth in data creation and storage needs The increased penetration of internet-enabled devices like smartphones and tables and the growing trend of digitalisation have led to the increase in the growth in data creation globally. Essentially, e-commerce, social networking, file sharing, video streaming (YouTube reported a 49.5% CAGR in videos uploaded each minute between May-09 to May-13, now with over 6 billion hours of video watched each month on YouTube), and even growth in s, web-browsing usage, has led to a strong increase in data creation over the years. External studies by Statistic Brain state that Google has c. 6 bn searches a day in 2013, while Facebook has c.1.4 bn monthly active users. The recent trend towards "Big Data" (collection and analysis of historical and real-time data) is also driving demand for data storage. BroadGroup expects internet-enabled devices and global internet users to continue growing at a strong pace, reporting a F CAGR of 26.6% and 17.2% to 18.2 bn and 5.3 bn, respectively, all of which should continue to support the growth in data creation/usage. Meanwhile, Cisco estimates that global monthly IP (Internet Protocol) traffic (IP traffic relates to the volume of data that is being transferred across the internet, excludes local traffic like those within an organisation network) will continue to display strong growth momentum, with a F CAGR of 21%, after reporting a 125.9% CAGR between 2007 and A unique play on the favourable data sector fundamentals, with growing demand, high visibility to rental growth (due to stepup clauses) and long WALE Growing data creation and storage needs is one of the key drivers for data centres, which house the servers Figure 39: Total global data created annually Zettabytes (1 bn Terabytes or bytes) CAGR: 47.7% CAGR: 58.5% F 2015F 2016F 2017F 2018F Source: BroadGroup Figure 40: Cisco analysis of growth in monthly IP traffic (PetaBytes a month) PetaBytes (1,000 Terabytes or bytes) 50,000 45,000 40,000 Asia Pacific : F CAGR: 21% 35,000 30,000 25,000 20,000 North America: F CAGR: 20% 15,000 10,000 Western Europe: F CAGR: 18% 5, F 2015F 2016F 2017F 2018F Asia Pacific North America Western Europe Source: Cisco, BroadGroup (KEPE.SI / KDCREIT SP) 19

20 Growing demand for data centres with cloud computing and e-commerce Background information: Both "cloud" and "data centre" are similar in that they both store data, but the main difference is that cloud is an "off-premises" form of computing that stores data on the internet, while the data centre is an on-premises hardware that stores data. Businesses generally consider three metrics before deciding whether to have their own data centre or use cloud: business needs, data security and system costs. In a nutshell, a smaller company may opt for cloud as it is more cost effective and the time-tomarket is much faster, whereas a data centre will take longer to get started and cost of operations are quite high. As cloud is also less secure as it is an external form of computing, compared to a data centre which is physically connected to a local network, a business entity can manage the security aspect of it. And lastly, a data centre is ideal for companies that need a dedicated, customised solution, whereas a cloud system would likely appeal to the simpler businesses, and capacity would be scalable as and when required. Cloud computing and the increasing move from conventional shopping to e- commerce are also driving the need for data centres In layman terms, cloud computing is a systems architecture model for internet-based computing. Although it is perceived to be metaphorically "mist-like data hanging out in the ether", as interestingly described in article in TheAtlantic, the cloud actually consists of massive computer servers, powered by generators, cooled by air conditioners and stored in warehouses (also known as data centres). Figure 41: Brief summary on how cloud computing works, and what role a data centre plays Cloud computing allows local computers to access the cloud (a network of computers "off-premises") to process applications without the local computer requiring to do the heavy lifting. An example of cloud computing is when we access our accounts on a web-based service (e.g., Gmail). The software and storage does not exist on your computer but is stored on the service's computer cloud. Data centres house these remote computers, databases and application servers. Source: HowStuffWorks, Credit Suisse With the dynamism and agileness of the cloud model, cloud computing is fast gaining popularity among corporate and individual end-users thus driving data centre demand. BroadGroup estimates that the cloud infrastructure services will deliver a CAGR of 35-55% per year for the next five years from Meanwhile, the growing migration of conventional retail to e-commerce has also been driving the need for data creation/usage, and subsequently, the need to host these data would drive the demand for data centres. IDC estimates global e-commerce transaction to grow to 34.8 bn by end of 2014 where the Asia Pacific region alone will represent about 46% of global digital buyers. Meanwhile, studies by emarketer estimate global B-to-C (business-to-consumer) e-commerce sales will grow 20.1% to reach US$1.5 tn in 2014; Asia Pacific to be responsible for over a third of these sales, overtaking North America for the first time in 2014, in terms of sales. (KEPE.SI / KDCREIT SP) 20