Tuesday, November 30, 2010

CitySpring Infrastructure Trust

CitySpring Infrastructure Trust: Kim Eng downgrades to Sell from Hold and reduces TP to $0.52 from $0.62. Highlight that in move to avoid potential credit rating downgrade of the bonds issued, grp will set aside A$20m in an escrow account before Jan 2011…

While although move place bonds out of CreditWatch by S&P, note that a capital structure plan possibly involving an equity cash call is unavoidable, in view of the presence of other debt obligations ($142m corporate loan due in Aug 2011 and $120m City Gas loan due in 2012) Forward yield of 7.1% based on previous DPU guidance appears compelling but the risk of dilution lingers...

Reduce DPU assumption for FY12 onwards to 3c from 4.2c (pre-dilution), to factor in the removal of Basslink’s contribution.

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