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Keppel Infrastructure Trust’s Latest Earnings: What Investors Should Know

Keppel Infrastructure Trust  (SGX: A7RU), or KIT for short, reported its latest earnings yesterday evening. The reporting period was from 1 October 2015 to 31 December 2015.

KIT is the offshoot from an acquisition of the old Keppel Infrastructure Trust by CitySpring Infrastructure Trust. In its current form, KIT consists of four major business segments, namely City Gas, Concessions, Keppel Merlimau Cogen Plant (KMC) and Others.

The restructured business trust started trading in mid-May last year, therefore comparisons with the previous sequential quarter are used, as opposed to the same quarter in the previous year.

Financial highlights

Here’s a rundown on KIT’s latest financial figures:

  1. Revenue clocked in at S$160.5 million in the reporting quarter, up nearly 5% from the prior quarter.
  2. Net profit for the reporting quarter was S$8.7 million, up from S$4.1 million in the second quarter of 2015.
  3. But, the distribution per unit (DPU) for the reporting quarter will be 0.93 Singapore cents, unchanged from the prior quarter.
  4. KIT reported an adjusted net asset value per unit of S$0.343, down slightly from the S$0.350 seen in the previous quarter.

Beyond these, Foolish investors might want to keep an eye on the business trust’s debt profile. The debt profile may provide clues on how the trust is funded and its sensitivity to the interest rate environment. These are summarised for KIT below:

2016-01-19 KIT Debt Table
Source: KIT’s earnings report

For KIT, 57% its loans are denominated in Singapore dollars. The remainder is in Australian dollars. The trust also commented that it has A$710 million in loans that act as a natural hedge for its Australian dollar cash flows.

Operational highlights

KIT’s City Gas segment logged in S$16.4 million in distributable cash flows for the reporting quarter. Meanwhile, Concessions and KMC brought in S$17.6 million and S$11.3 million, respectively.

The trust’s Australia-based Basslink electricity interconnector ran into issues late last year. In the earnings release, the trust’s managert had provided a short update on the situation:

“On 20 December 2015, Basslink was taken out of service due to a cable fault incident, the cause of which is being investigated. It is currently estimated that the link may resume operations in March 2016, although there remains a significant number of unknown variables such as weather, seabed conditions and logistical arrangements that may impact the timeframe.

This is presently not expected to have any material impact on the net tangible asset per unit and distribution per unit for the financial year ending 31 December 2016. Unitholders will be updated as more information becomes available, and of the likely return to service date. ”

The following is the outlook for KIT’s other assets that are provided by the trust’s manager in the earnings release:

“City Gas’ performance could fluctuate depending on changes in tariffs in response to changes in fuel costs. The tariff adjustments mechanism is designed to ensure that City Gas fully recovers its fuel costs over the long run.

Waste and water concessions have long-term contracts with Singapore statutory bodies and derive most of their cash flows from capacity and availability payments. As such the underlying performance of these assets are expected to remain stable.

KIT has entered into an agreement with NEA to provide additional incineration capacity at the Senoko WTE plant. The upgrade, started in September 2015, is planned to be completed in 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 of the plant. Two out of six boilers have been completed as at the end of 2015.

The KMC Acquisition was completed on 30 June 2015. Under the capacity tolling agreement, KMC will receive a maximum annual capacity fee of S$108 million as long as it meets the availability and capacity test targets, with most of its operating costs being passed through.”

Foolish summary

KIT closed at S$0.485 today. This translates to a historical price-to-book ratio of 1.36.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.