Latest Earnings from Keppel Infrastructure Trust: Moving Along

Keppel Infrastructure Trust  (SGX: A7RU) had reported its latest earnings yesterday evening. The reporting period was for the first-quarter of the calendar year 2016 (1Q FY16).

Keppel Infrastructure Trust, as its name suggests, is a business trust that focuses on infrastructure assets. Its assets include waste-to-energy plants, a desalination plant, a water treatment facility, electricity facilities, a gas production business, a data centre, and a telecommunications infrastructure business.

The trust came into its current form following an acquisition of the old Keppel Infrastructure Trust by CitySpring Infrastructure Trust in mid-May 2015 and the purchase of the Keppel Merlimau Cogen Plant in June 2015.

With that, let’s take a look at the trust’s latest results,

Financial and balance sheet highlights

Due to the acquisition, there was a change in the trust’s reporting period. As such, comparisons for the reporting quarter will be drawn only with the quarter ended 30 June 2015 (1Q FY15).

Here’s a rundown on Keppel Infrastructure Trust’s latest financial figures:

  1. Revenue clocked in at S$131.2 million in the reporting quarter, up by 14.7% from 1Q FY15.
  2. Distributable cash flow came in at S$40.7 million, which was 154% higher compared to the S$16 million seen in 1Q FY15.The big spike is largely the result of the acquisitions.
  3. Distribution per unit (DPU) for the reporting quarter was 0.93 Singapore cents.
  4. Keppel Infrastructure Trust reported an adjusted net asset value per unit of S$0.327, down slightly from the S$0.343 seen as at end-December 2015.

Moving on, let’s look at the business trust’s debt profile.

  1. Gearing came in at 36% with a blended average interest rate of 4% to 5%. The trust’s total borrowings stood at S$1.71 billion with a weighted average term to expiry of approximately 3.6 years. Approximately 86% of the trust’s total loans are hedged.
  2. 57% of Keppel Infrastructure Trust’s loans are denominated in Singapore dollars. The remainder are in Australian dollars which act as a natural hedge for the trust’s Australian-dollar cash flows.

Business highlights

Looking at Keppel Infrastructure Trust’s business segments, City Gas contributed S$14.1 million in distributable cash flows in 1Q FY16, up 28% from a year ago. Meanwhile, Concessions and KMC (the Keppel Merlimau Cogen plant) brought in S$17.4 million and S$10.5 million, respectively, in distributable cash flows. In 1Q FY15, Concessions’ distributable cash flows were S$17.3 million on a pro-forma basis; there was no KMC in 1Q FY15 as the asset wasn’t bought yet.

The last segment, Others, saw a distributable cash outflow of S$1.4 million, though this is an improvement from 1Q FY15 when the outflow was S$2.3 million.

A future outlook

Going forward, Keppel Infrastructure commented in its earnings release that “City Gas’ performance could fluctuate depending on changes in tariffs in response to changes in fuel costs.” The trust explained that the tariffs were designed so that City Gas “fully recovers its fuel costs over the long run.”

As for Concessions, which deals with waste- and water-related activities, the trust commented that the “underlying performance of these assets are expected to remain stable” given in part the long-term nature of their contracts with statutory bodies in Singapore.

Regarding the trust’s other business assets, it had this to say:

“While intended to be neutral over the long-term, the CRSM [commercial risk sharing mechanism] in Basslink [one of the trust’s electricity-related assets] may fluctuate in the short-term and such fluctuations will affect the revenues of Basslink. The CRSM may be reviewed in April 2016.

DataCentre One has been completed and handed over on 12 April 2016 and would commence generating cash flows thereafter.

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 June 2016, although there remains a significant number of unknown variables such as weather, seabed conditions and logistical arrangements that may impact the timeframe.

Based on current circumstances and subject to further professional advice and investigation, Basslink believes that the outage is a force majeure event and the fault is covered by insurance. The cable fault 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.”

Keppel Infrastructure Trust closed at a price of S$0.51 per unit yesterday. This translates to a price-to-book ratio of 1.5.

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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 Esjay does not own shares in any companies mentioned.