CoreSite Realty Corporation (NYSE: COR) and CyrusOne (NASDAQ: CONE) have been market darlings in the data center sector space. Due to the adverse impact of a tenant default as well as lackluster 2015 FFO projections, DuPont Fabros Technology (NYSE: DFT) has been punished by the investment community.
Year-to-date, both CoreSite and CyrusOne have been solid performers with gains of 23 and 17 percent respectively. The market opportunity seems so favorable that Carlyle Group decided on Monday, April 27, to monetize their investment in CoreSite by selling a portion of their holding. The shares decreased by 4 percent yesterday.
Conversely, DuPont Fabros is down 3 percent this year. Nevertheless, by addressing key questions during their next earnings call scheduled for May 7, DuPont Fabros’s outlook for the balance of 2015 could improve. Some of the questions are as follows:
Has the situation with Net Data Centers been rectified?
Net Data Centers, one of DuPont Fabros’s top customers, filed a voluntary petition for relief under Chapter 11 Bankruptcy protection last February and ceased making rental payments. The question is whether Net Data Centers will either resume making payments or vacate the space enabling DuPont Fabros to generate revenue with a new tenant.
Will the average interest rate increase?
The company has indicated that interest expenses will increase due to the issuance of new debt for development. The outstanding concern is the extent to which the increase in interest expenses will limit 2015 FFO results.
Will the new CEO Christopher Eldredge shed light on growth prospects?
As noted in the previous earnings call, Mr. Eldridge has been tasked by the Board of Directors to create a strategic plan for the company. The question is whether the growth focus will change from their wholesale product to alternative offerings such as the recently launched mini-wholesale product.
With answers to the above questions, it is believed a more informed investment decision can be made.
|Dividends declared per common share, $||0.48||0.62||0.95||1.47||1.68|
|Q4 Dividend, $||0.12||0.20||0.25||0.42|
|Dividend payout ratio, in percent||39.7||48.1||50.8||58.8||67.2|
|Dividend yield, in percent||2.0||2.6||3.8||4.4||4.7|
|FFO per share, $||1.61||1.48||1.46||2.37||2.30|
|FFO per share (Q4 only), $||0.37||0.38||0.46||0.58|
|Alternate FFO per share (Normalized), $||1.48||1.96||2.39||2.37|
|AFFO per share, $||1.21||1.29||1.87||2.50||2.50|
|Debt to total capitalization, in percent||23.9||23.3||27.0||25.1|
|Occupancy – Total, in percent||79||90||94||94|
|Share Price on 31 December, $||24.22||24.16||24.71||33.24||36.07|
|P/FFO on 31 December||15.0||16.3||16.9||14.0||15.7|
|2015P= 2015 Projections|
Written by Heli Brecailo
Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.
Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.