Keppel Infrastructure Trust - UOB Kay Hian 2016-04-14: 1Q16 Steady Performance From All Units, Save Basslink

Keppel Infrastructure Trust - UOB Kay Hian 2016-04-14: 1Q16 Steady Performance From All Units, Save Basslink KEPPEL INFRA TRUST A7RU.SI 

KEPPEL INFRASTRUCTURE TRUST (KIT SP) - 1Q16: Steady Performance From All Units, Save Basslink 


RESULTS 


• 1Q16 distributable cashflow of S$41m. 

  • Keppel Infrastructure Trust (KIT) reported 1Q16 distributable cash flows of S$40.7m, 7% above our quarterly estimate of S$38m. 
  • Variations between actual figures and our estimates arose from CityGas, Keppel Merlimau Cogen (KMC) and lower than-expected corporate expenses. The other business units were in-line. 

• CityGas’ distributable cashflow up 28% yoy. 

  • This was due to an adjustment of gas tariffs to reflect actual fuel costs arising from a lower oil price environment. Compared against the previous quarter (3QFY15), distributable cashflow fell as expected by 14% owing to lower gas tariffs. 

• KMC suffered from lower availability. 

  • KMC’s distributable cashflow was 5% lower qoq at S$10.5m vs S$11.3m last quarter. The unit underwent a longer-than-expected maintenance which lowered plant availability to 95.1% in 1Q16. This resulted in a slight decrease in capacity fee for the period. Normalised distributable cashflow for this unit is about S$11m per quarter. 

• Concessions distributable cashflow of S$17.4m, in-line. 

  • The unit’s performance was in-line, reporting S$17.4m distributable cashflow or 24% of our full-year estimate. 

• DPU of 0.93 S cents in-line. 

  • DPU for 1Q16 was 0.93 S cents, in line with guidance of annualised DPU of 3.73 S cents. The dividend is payable on 20 May 16 and the ex-date is 19 Apr 16. 


STOCK IMPACT 


• No impact to distributable cashflow from extended Basslink downtime. 

  • Basslink is guided to resume operations by Jun 16 once ongoing repairs are completed, weather conditions permitting. The repair costs are likely to be fully covered by insurance, so the impact to KIT is minimal. The current downtime in Basslink has no impact as it does not contribute to distributable cashflow till 2025. 

• DC One to contribute from 2Q16 onwards. 

  • KIT announced that DC One had been handed over as of 12 Apr 16, and would commence cashflow contributions. 
  • We estimate annual contribution of S$3m, or 2% of total distributable cashflow for 2016. 

• Raising 2016 distributable cashflow estimate by 5.5%. 

  • We adjust our 2016 distributable cashflow estimate upwards by 5.5%, from S$152m to S$160m. The adjustment primarily accounts for our prior underestimation of CityGas’ distributable cashflow on lower fuel costs, which we revise upwards. This is offset by a small reduction in KMC’s cashflow for the year.

VALUATION 


• Maintain HOLD and keep target price unchanged at S$0.55. 

  • Our DCF-based target price is derived from a detailed assessment of its cashflows and assumes a 0% terminal growth for its CityGas business unit. Part of KIT’s high yield of 7% represents a return of capital owing to its gradual NAV decline. 
  • We estimate this decline to be about 1 S cent per share per year, with shares currently trading at a valuation not expected till 2023. 
  • Recommended entry price is S$0.48. 



Foo ZhiWei UOB Kay Hian | http://research.uobkayhian.com/ 2016-04-14
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 0.55 Down 0.56


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