Keppel Infrastructure Trust’s Latest Earnings: What Investors Should Know
On Monday, Keppel Infrastructure Trust (SGX: A7RU) released its 2017 first quarter earnings.
As a quick background, Keppel Infrastructure Trust (KIT) is a business trust that started life as CitySpring Infrastructure Trust (CIT). In May 2015, CIT acquired the business undertakings and assets of the old KIT. Upon completion of the acquisition, CIT took on the name Keppel Infrastructure Trust. At the moment, KIT has six major businesses: City Gas, Concessions, Keppel Merlimau Cogen Plant (KMC), DataCentre One (DC One), CitiNet and Basslink.
You can catch KIT’s 2016 third quarter earnings report here.
The following’s a rundown on some of KIT’s latest financial figures:
1. Gross revenue was $155.3 million in the reporting quarter, an 18.3% increase from the same quarter a year ago.
2. Profit attributable to unitholders was $6.7 million, a sharp rise from the mere $2,000 profit recorded in the same quarter a year ago.
3. Distribution per unit (DPU) for the quarter was 0.93 cents, unchanged from the first quarter of 2016.
4. As of 31 March 2017, KIT had an adjusted net asset value of 31.1 cents.
Let’s take a look at KIT’s debt profile:
1. KIT had total borrowings of $1.84 billion and ended the reporting quarter with a gearing of 38.7%.
2. The interest rate on its loans is between 4% and 5%.
3. The weighted average term to expiry for its debt is 2.9 years.
4. KIT reported that 85% of its loans are hedged.
5. For the reporting quarter, 59% of the loans are denominated in Singapore dollars. The rest are in Australian dollars, which acts as a natural hedge for its Australian cash flows.
KIT had $34.2 million in distributable cash flow for 2017’s first quarter. This is down from the distributable cash flow of $40.1 million recorded a year ago.
City Gas contributed $8.9 million, down from $14.1 million in 2016’s first quarter. Concessions pitched in with $17.4 million, which was relatively flat year-on-year. Meanwhile, KMC recorded $11.3 million in distributable cash flow, up from $10.5 million a year ago. Elsewhere, DC One generated $445,000, which was a reversal from the negative $62,000 recorded in the same quarter in the previous year. The rest of the portfolio generated negative distributable cash flow of $3.8 million.
KIT’s manager summarized the outlook for the trust with the paragraph below:
“The Trustee-Manager will evaluate asset enhancement opportunities in its portfolio, and will continue to identify and evaluate suitable acquisitions, including those from the Sponsor, under its investment mandate to further grow the Trust.”
KIT also highlighted potential issues in the future:
“KIT’s assets typically generate stable cash flows, with repairs and maintenance of the plants provided for as scheduled outages.
However, if such an outage lasts longer than anticipated and causes the availabilities of the plants to fall below their respective contracted levels, the plants will not be able to receive full payments due under their contracts. In addition, if the plants incur significant downtime due to extraordinary or extensive repairs, it could also lead to termination of contracts and/or liabilities or compensation arising under such agreements.”
KIT’s Basslink asset was taken out of service in December 2015 due to a cable fault and only resumed service in June 2016. Investigations has been inconclusive, but the business trust maintains that the outage is a force majeure event. We will dig into this issue in another article.
Units of KIT closed at $0.53 each yesterday. This translates to a historical price-to-book ratio of 1.7 and a distribution yield of 7%.