At its initial public offering (IPO), units of Keppel DC REIT were offered at S$0.93 apiece. The REIT closed at a unit price of S$1.48 on 18 January 2018, providing its early investors a total return of over 80% since its IPO (including dividends). As Foolish investors, we want to look beyond the stock price movement to understand the underlying business.
And for that, we can turn to Keppel DC REIT’s IPO prospectus. The document contains a wealth of information on the REIT’s business and market.
Trends that drive growth
BroadMedia Consulting (BMC), a group that was commissioned by Keppel DC REIT’s manager to prepare industry research, highlighted two huge trends that could drive demand for data centres.
One key trend is the growth in the amount of data used. BMC noted:
“Data growth has been driven by several factors such as the proliferation of Internet enabled devices (e.g. smart phones and tablets), growth in video streaming and file sharing, increased popularity of eͲcommerce and social networking and more generally, the increase in the number of global Internet users.”
To this point, BMC forecasted that the number of internet users and devices will hit 5.3 billion and 18.2 billion, respectively, in 2018.
To be sure, according to Statista, there are an estimated 3.6 billion internet users in 2017. So, it is possible that the number of internet users in 2018 might not reach BMC’s forecasted figure from 2014.
However, the growth trend is clear. As more users come online, data usage will increase. In particular, BMC expects online video streaming to drive most of the growth. The research outfit said:
“While many aspects of internet growth such as e-commerce and social networking are cited as drivers for data centre growth, the most significant driver is online video streaming, and in particular the demand for High Definition video streaming, which BroadGroup estimates requires an additional 20-100 times the storage space vis-a-vis traditional video.”
BMC concluded by saying that the data created worldwide is expected to grow at a compounded annual growth rate of 47.7% between 2013 and 2018.
Hang on for more on Keppel DC REIT next week.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chin Hui Leong doesn't own shares in any companies mentioned.