Keppel Infrastructure Trust’s Latest Earnings: What’s Next After A 23% Jump In Profit?

Keppel Infrastructure Trust (SGX: LH4U) released its fiscal first quarter earnings report yesterday evening.

Formerly known as K-Green Trust, Keppel Infrastructure Trust now owns a portfolio comprised of three assets: the Senoko Waste-to-Energy plant, the Keppel Seghers Ulu Pandan NeWater plant, and the Keppel Seghers Tuas Waste-to-Energy plant.

Some basic numbers

For the first quarter (three months ended 31 March 2015), the trust’s revenue dipped 1.1% to S$16.61 million due to a 6% drop in finance income to S$3.8 million (there are two components to the trust’s revenue: Finance income and Operation & maintenance income).

Even so, Keppel Infrastructure Trust managed to enjoy a 23.1% year-on-year jump in net profit to S$4.3 million. The profit growth came primarily on the back of lower electricity costs; the trust had experienced a 52% drop in electricity costs to $0.78 million during the quarter.

Keppel Infrastructure Trust ended its fiscal first quarter with a strong balance sheet; the trust had S$33.6 million in cash on hand with just S$3.5 million in borrowings. That said, this is still a slight step backward from a year ago when the trust had S$40.3 million in cash and no debt.

Moving on, the trust ended the quarter with S$13.4 million in operating cash flow, a dip from the figure of S$14.3 million seen a year ago.

Prospects and valuation

In November, Keppel Infrastructure Trust announced that it would be merging with CitySpring Infrastructure Trust (SGX: A7RU) to create Singapore’s largest infrastructure-focused business trust.

The merger is subject to various approvals, including that of unitholders. Keppel Infrastructure Trust will be holding an Extraordinary General Meeting (EGM) on 30 April 2015 for unitholders to vote on the matter amongst other issues.

Meanwhile, Keppel Infrastructure Trust is still busy expanding the scope of its existing assets. An example of this is given in its latest earnings release:

On 26 September 2014, KIT [Keppel Infrastructure Trust] entered into an agreement with NEA to provide additional incineration capacity at the Senoko Waste-To-Energy plant. The upgrade is currently planned to take place between 3Q 2015 and 3Q 2016 and will progressively increase the contracted incineration capacity of the plant by up to 10% from 2,100 tonnes per day. This is expected to increase the operating cash flows from the plant.”

Moving forward, Keppel Infrastructure Trust expects the underlying performance of its three existing assets “to remain stable.” The trust mentioned that its Senoko and Tuas assets “derive most of their income from capacity payments, which offer a stable source of income with little correlation to economic or demographic fluctuations.”

Keppel Infrastructure Trust last changed hands at S$1.10 on Monday. That translates to a historical price-to-book ratio of 1.17 and a distribution yield of around 7.1% (based on its distributions per unit of 7.82 cents for 2014).

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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 doesn’t own shares in any companies mentioned.