Growing Profits at K-Green Trust

K-Green Trust (SGX: LH4U), an infrastructure business trust that is sponsored, partly-owned, and managed by Keppel Corporation (SGX: BN4), announced its first quarter results yesterday. K-Green Trust focuses on “green” infrastructure assets in Asia, Europe and the Middle East but currently only has operations in Singapore.

The trust owns three concessions to operate three assets here. The first is a 15-year concession that started in 2009 to run the Senoko Waste-to-Energy Plant; the plant is designed to produce 56MW (mega watt) of power and incinerate up to 2,400 tonnes of waste a day. The second concession, for the Keppel Seghers Ulu Pandan NEWater Plant, is 20-years long and has started since 2007. The last concession started in 2009 and would last some 25 years; it’s a concession to run the Keppel Seghers Tuas Waste-to-Energy Plant which is capable of producing 22MW of energy.

Operating results for the quarter

For the three months ended 31 March 2014, the trust recorded revenue of S$16.8million which is 1.3% lower than the first quarter of 2013. This is mainly due to a decrease in finance income, which is accrued from one of its non-current asset accounts on its balance sheet, “Service concession receivables”. This is to be expected: As the receivables are paid down, the income accrued will be reduced as well.

However, despite the lower revenue, K-Green Trust was still able to produce a strong profit of S$3.5 million for the quarter. That is an improvement of 9.4% from a year ago. Most of the gain was achieved through lower electricity and trust expenses. This resulted in the trust ending the quarter with 0.56 cents of earnings per unit, a 9.8% year-on-year increase.

K-Green Trust continues to have one of the best balance sheets compared to all the other business trusts listed in Singapore; it has total assets of of S$617.9 million while only having S$16.3 million in total liabilities. That also translates into a net asset value of S$601.6 million, or S$0.96 per unit of the end of the quarter.

Foolish Summary

K-Green Trust is able to tab on the “green” infrastructure projects of Keppel Corp and so, there’s always the possibility of an increase in its asset base in the future.

For now, it is a trust with a clean balance sheet trading at S$ 1.04, representing an 8% premium to its book value. The trust has a high historical distribution yield of 7.5% based on its distributions per unit of 7.82 Singapore cents for 2013. Keppel Corp continues to be the main single unitholder of the trust, owning around 49% of the total units outstanding.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.