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Keppel Infra Trust
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paul1688
Veteran |
20-Jul-2017 10:29
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From DBSV 19 Jul 2017
2Q17 distribution of 0.93 Scts in line. Keppel Infrastructure Trust (KIT) declared DPU of 0.93 Scts for 2QFY17, along expected lines &ndash the eighth straight quarter of steady DPU. Group revenue was up by 16% y-o-y and 2% q-o-q to S$159m in 2Q17 and distributable cashflows &ndash the key number for KIT &ndash came in at S$39m, up 2% y-o-y and 13% q-o-q. City Gas cash generation was up 30% q-o-q in 2Q17 to more normalised levels as gas tariffs are always adjusted in line with underlying fuel costs with a lag. This is likely to smoothen out over time. Cash flows from other key assets remained stable and the Trust&rsquo s newest asset, Data Centre One, contributed higher positive cash flows, as rental rates were renewed in line with existing agreements. Basslink also generated positive funds from operations for the second successive quarter but the Trust does not use these cash flows for distribution purposes. Some Basslink issues still unresolved. Basslink has yet to resolve ongoing discussions with Hydro Tasmania and the banking syndicate on matters arising from the undersea cable outage that occurred through most of 1H16. While Hydro Tasmania has not paid Basslink facility fees since September 2016 (as Hydro Tasmania disagrees that the outage is a force majeure event), Basslink has been receiving some good faith payments from Hydro Tasmania since December 2016. As such payments received are lower than the facility fees, Basslink may be unable to meet the minimum debt service coverage ratio (DSCR) under the project financing. However, after the resumption of the full facility fees for a 12-month period, Basslink expects to meet the minimum DSCR which is computed on a trailing 12- month basis. Basslink remains current on the debt and all outstanding payments under the project financing have been fulfilled. While a technical debt default situation cannot be ruled out at Basslink, do note however that Basslink-related issues have no impact on KIT' s distributions as Basslink has not been contributing to distributable cash flows for a while and is not expected to in the near future either. Market appetite for safe yield has resulted in re-rating. KIT&rsquo s track record of steady distributions backed by utility assets that generate regulated/availability-based cashflows irrespective of economic cycles has gained more recognition in recent months, leading to yield compressing from around 7.0-7.5% levels to around 6.5% levels currently. With the listing of more quality infrastructure business trusts in Singapore, we hope this asset class can reverse previous adverse reputation and gain more acceptance in the investment community. This should make acquisitions fructify sooner than later. Current gearing levels are not very aggressive for a utility asset owner, with net debt-to-EBITDA ratio of around 5.1x (excluding Basslink). Refinancing risks are also limited in the near term as close to 100% of loans are due only in 2019 and beyond. While there is no statutory cap on gearing levels, we estimate that the Trust could look at acquisition targets in the S$1bn enterprise value range funded by a 2:1 debt:equity mix. The share price re-rating should make it easier for the Trust to raise equity at a lower cost of capital as and when required. A lower cost of funding will also enable the Trust to bid more aggressively for M& A targets. Apart from the ROFR pipeline, management continues to evaluate third-party options in sectors like energy, telecoms, water and waste management. We look forward to the Trust kicking off its M& A ambitions in FY17. This should be a key catalyst for further re-rating. Maintain BUY with higher TP of S$0.60. Given the Trust&rsquo s low correlation to the market, we lower our beta estimate and consequently our cost of equity assumption falls to 5.5%. Based on our DDM-based valuation methodology, we thus derive a higher valuation of S$0.60 for KIT. The Trust is currently trading at a yield of 6.6% based on annual distribution forecast of 3.72 Scts in FY17/18. Given the total return potential of about 13% (including dividends) at current price, we maintain our BUY call on the stock. Remarks : Sharing. Not recommendation to Buy or Trade. |
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waters
Senior |
22-Jan-2017 17:13
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Financial Reporting for Business Trusts and Collective Investment SchemesSingapore, 19 January 2017... The Monetary Authority of Singapore (MAS) announced today that registered business trusts will adopt a new Singapore financial reporting framework that is identical to the International Financial Reporting Standards (IFRS), while authorised collective investment schemes will continue to prepare financial statements using accounting practices recommended by the Institute of Singapore Chartered Accountants (ISCA). 2 On 29 May 2014, the Accounting Standards Council (ASC) announced that Singapore-incorporated companies listed on the Singapore Exchange (Singapore listed companies) must apply the new Singapore financial reporting framework (New Framework) for annual periods beginning on or after 1 January 2018. 3 The ASC&rsquo s decision, however, does not cover financial statements of the following two categories of Singapore-constituted issuers under MAS&rsquo purview : (i) registered business trusts (Registered BTs1) and (ii) authorised collective investment schemes, including real estate investment trusts (Authorised CIS2). 4 Taking into account feedback from the industry, and having considered practices in comparable jurisdictions, MAS has decided that : (i) Registered BTs will be required to prepare financial statements in accordance with the New Framework for annual periods beginning on or after 1 January 2018. This will align the treatment for Registered BTs with that of Singapore listed companies and (ii) Authorised CIS will not be required to prepare financial statements in accordance with the New Framework. Authorised CIS should continue to prepare financial statements according to the Statement of Recommended Accounting Practice 7 : Reporting Framework for Unit Trusts (RAP 7), issued by ISCA. This treatment for Authorised CIS is consistent with practices in other major fund jurisdictions such as the United Kingdom and the United States of America. 5 MAS will also be amending prospectus disclosure requirements3 to replace references to &ldquo FRS&rdquo with the New Framework with effect from 1 January 2018. MAS will provide transitional relief for historical financial statements in prospectuses lodged on or after 1 January 2018. In addition to restating up to three years of historical audited financial statements fully to the New Framework in the prospectus, issuers of shares, debentures and units in business trusts will also have the option of using the transitional relief provided by MAS. Details of the transitional relief arrangements are set out in Appendix A. http://www.mas.gov.sg/News-and-Publications/Media-Releases/2017/Financial-Reporting-for-Business-Trusts-and-Collective-Investment-Schemes.aspx |
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waters
Senior |
30-Apr-2016 14:48
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Sometimes, it is good if investors can attend AGM and ask the management some questions during Q& A or the refreshment period.
I am thinking of rebalancing my portfolio after some discussion with the management. I used to own shares in the Keppel Infra Trust prior to the merger of city spring and have enquired them on the following legacy assets:-
1. Senoko Plant - Approximately 9 years remaining
2. Ulu Pandan Plant - Approximately 12 years remaining
3. Tuas Plant - Approximately 19 years remaining
They told me that generally discussion on the extension of concession will typically take place about 5 years prior to the end of the concession.
In respect of the Senoko plant, it is unlikely to be extended because of its location and age, while the Ulu Pandan NEWater plant is also unlikely to be extended as the land surrounding the area has been earmarked for other developments. It means that the will no longer be recurring income from these 2 assets after maturity of the concession. My shareholdings in KIT is meant for regular dividend income, so am afraid of the impact of loss of income following the end of the 2 concession. I think the market have already priced in the impacts in current share price. Now looking for other REITs or Trusts to invest into.
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paul1688
Veteran |
22-Apr-2016 09:17
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Just sharing my own position.
I also just re-entered REITs with logistics/warehousing/business park themes. Looked at several including Cache, Soilbuild, Viva, etc. Only just became vested in Mapletree Log on basis of portfolio quality and size, tenancies, parentage, Managers' reports and of course relative yield. Just sharing. Not advocating the same for anyone. Nothing is guaranteed in investments.
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ehclim
Elite |
22-Apr-2016 09:12
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I second your view with vested interest. I am only interested in the KIT predictable DPU quarterly.
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paul1688
Veteran |
22-Apr-2016 09:08
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My unverified, non financial accounting based view.
I assume the decreasing NAV part of KI comes from the Cityspring portion pre merger. This is an artifact of the asset depreciating model used. Don't think NAV of CS assets is tied to concession but can check. Regardless even at full depreciation (an accounting thing) it does not mean it is a non yield producing asset. KI is in utilities and my sense is if you see who the parent is and how semi captive the industry is, I would not be worried about non concession no sales. In fact, KI is probably one of the more defensive REITs or Trusts in SGX and the yield is predictably stable albeit around a small variance band that it becomes boring. The albatross over it is the Basslink thing but Fund Manager smartly fire walled that part of the asset from mainstream. Bottom line, this one seemed good to keep in an investment (not trading) portfolio like a FD to weather through the crazy volatility and uncertainties. My view only. Not enticement to buy or keep.
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us9392
Member |
22-Apr-2016 03:37
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Am long SPH and KDataCenter reits, both have low gearing, although the yield is lower. I am looking to buy logistics reits. I am always wiling to exchange strong names and gearing for lower yield. |
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waters
Senior |
22-Apr-2016 01:35
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Yes Bro, I also have the same opinion and think this is smilar to an annuity. However, I am thinking of which other high yield counter to get into after I exit from Kep Infra Trust. |
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us9392
Member |
22-Apr-2016 00:52
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Defensive it is, but watch how the NAV dips everytime it paysout DPU. By the time the concession ceases, there might be nothing left. I have since sold it after the merger. Anyone care o clarify ? |
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waters
Senior |
22-Apr-2016 00:20
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This defensive baby yields 7.5% at current price. Defensive and stable share prices. Wonder what happened when its service conceession nears expiry, can renew? Currently i vested in it |
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spore1
Supreme |
19-Oct-2015 19:53
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DPU of 0.93 cents seems not so good. Thought at least 1 cents. | ||||
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