What Investors Need to Know about Keppel Infrastructure Trust’s Latest Full-Year Earnings

Keppel Infrastructure Trust  (SGX: LH4U) released its full-year earnings report (for the financial year ended 31 December 2014) yesterday evening and this is what investors need to know about it.

The business trust, formerly known as K-Green Trust, had an investment focus on green infrastructure assets. On 15 April 2014, unit-holders approved a change in the business trust’s investment mandate to expand its portfolio to also include energy and environmental infrastructure assets.

On 18 November 2014, the trust announced that it would be merging with CitySpring Infrastructure Trust (SGX: A7RU) to create an infrastructure-focused trust with assets worth over S$4 billion; this will make the combined-entity the largest trust of its kind in Singapore.

With all these as a backdrop, let’s dive into Keppel Infrastructure Trust’s latest earnings report.

Some basic numbers

For the whole of 2014, revenue dipped 2.5% to $65.45 million. With the top-line decline, coupled with higher trust expenses and operating and maintenance costs, Keppel Infrastructure Trust saw its comprehensive income for the year fall by 10.4% to S$12.7 million.

Despite the decline in Keppel Infrastructure Trust’s bottom-line, it managed to keep its distributions per unit (DPU) for 2014 unchanged at 7.82 cents compared to a year ago.

Keppel Infrastructure Trust ended 2014 with a net asset value (NAV) of S$0.89 (after adjusting for distributions), representing a 6.3% decline from a year ago. The NAV of a trust is an important proxy for its economic value, so investors would ideally like to see this figure trend upwards over the years.

But that said, a look at Keppel Infrastructure Trust’s NAV at the moment might not give investors too much information given the impending merger with CitySpring Infrastructure Trust. To that point, Keppel Infrastructure Trust’s total assets will “increase from over $600 million currently…. to over $4 billion after completion of the combination with [CitySpring Infrastructure Trust].”

Foolish summary

The performance of Keppel Infrastructure Trust hasn’t exactly been fantastic (given the flat DPU and decrease in both top- and bottom-lines) but there are still some positives to note about its business. The three assets that it currently owns have long-term concession agreements with statutory bodies in Singapore such as the NEA (National Environment Agency) and PUB (Public Utilities Board). This can provide stability for the trust, which may be what income investors are seeking for.

The upcoming merger between Keppel Infrastructure Trust and CitySpring Infrastructure Trust is penciled in for completion in the second quarter of 2015 so that would be something to keep an eye on.

Keppel Infrastructure Trust last traded at S$1.09 on Monday. That translates to a historical price-to-book ratio of 1.17 and a distribution yield of around 7.17%.

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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 James Yeo does not own any companies listed above.