Keppel Infrastructure Trust

Keppel Infrastructure Trust: 2QFY16 results in line as concessions and KMC powers growth

Keppel Infrastructure Trust (KIT) posted results that were largely in line with street and management forecast with 2QFY16 DPU of 0.93¢ (+13.4% y/y) following the merger of Crystal Trust (old Keppel Infrastructure Trust) and CitySpring.

Distributable cash flows leapt more than 2.5x to $32.9m as cash flows generated from its waste and water treatment plants (concessions), and 51% owned Keppel Merlimau Cogen (KMC) more than offset the declines from City Gas and Basslink units.

A breakdown of cash flow contributions are as follows:
1) City Gas: $7.3m (-34.6%) - Cash flows were negatively impacted by the time lag in adjustment of gas tariffs to reflect actual fuel costs and higher interest expenses

2) Concessions: $17m (+759.3%) - First full quarter contributions from Crystal Trust assets

3) KMC ($12m) - Maiden contributions after acquisition completion on 30 Jun.

4) Basslink (Nil vs $2.1m in 2QFY15) - Entire distributable cash flow of $0.4m was used to repay debt.

5) Others (-$3.4m vs -$2.2m in 2QFY15) - Contributions were crimped as interest expense on qualifying project debt securities soared 221.8% to $22.7m despite a 313.6% jump in profit to $18.5m.

Overall, KIT’s core assets fulfilled all obligations with its City Gas unit growing its customer base by 5% to 740,000 as at the end of 2QFY16.

Leverage was reduced by 5ppt to 32% post equity fund raising for its KMC acquisition, with an average interest rate of 4-5%.

Management updated that construction of DC-One data centre remains on track and is expected to be completed in 1Q16.

The trust is also planning to increase capacity at its 2,100 tpd Senoko WTE plant by up to 10%. The upgrade of the first of six boilers was completed in early Sep with the remainder will be completed by 3Q16 and will boost cash flows on an incremental basis.

KIT is currently trading at an annualised 1HFY16 yield of 6.6% and 1.4x P/B.

Latest broker ratings:
Credit Suisse maintains Outperform with TP of $0.57
UOBKH maintains Hold with TP of $0.56