CitySpring – BT

CitySpring seeks assets worth $1b

But infrastructure trust says valuations are still too high

CITYSPRING Infrastructure Trust, sponsored by Singapore investment company Temasek, is seeking buys worth over $1 billion but said asking prices were still too high.

‘We’re on the negotiating table for a number of opportunities but valuations are too high. Holders of good assets are not yet coming down to a value we find reasonable,’ CitySpring chief executive Au Yeung Fai told Reuters in an interview yesterday.

The trust was not in a desperate need to acquire, and would rather walk away from deals rather than overpay, Mr Au Yeung said, adding that some deals were as much as 30 per cent above what he was prepared to fork out.

CitySpring wants to buy assets such toll roads, ports, and power firms in countries including China, India, and in South-east Asia, and with two-thirds of the opportunities reviewed worth under $1 billion and a third worth over $1 billion.

CitySpring shares closed at $0.71 yesterday, down half a cent.

The stock has fallen 23 per cent so far this year, against the benchmark Straits Times Index’s 27 per cent drop.

Mr Au Yeung, a former investment banker with Barclays and then JP Morgan, said most sellers in Asia are still holding on in hopes of riding out the global economic downturn, although he sees the potential for plum deals in Australia.

‘In Australia there are a lot of infrastructure trusts which are financially distressed and are looking to offload their assets. Maybe some of those valuations will come down, but they haven’t come down sufficiently yet,’ said Mr Au Yeung.

Stocks of Australian trusts such as Macquarie Infrastructure, Babcock & Brown Infrastructure and Transurban Group have been battered by poor market conditions this year, putting pressure on them to sell assets.

CitySpring, in which Temasek has a 28-per cent stake, currently owns a town gas producer and water desalination plant in Singapore, and an undersea electricity cable linking two states in Australia.

It is also interested in the third and final power generation firm PowerSeraya, being divested by Temasek , but has not yet decided whether to bid, Mr Au Yeung said.

Backing from deep-pocketed Temasek has made it easier for CitySpring to obtain bank financing, and this relationship has not hindered deal negotiations despite political sensitivities linked to the wealth fund’s overseas investments, Mr Au Yeung said.

‘This has never been an issue for us. Temasek still has a good reputation across the region, and assets we target typically are not government privatisations but in private hands,’ said Mr Au Yeung, a Cambridge University mathematics graduate.

Unlike Singapore-listed real estate investment trusts such as CapitaMall and Ascendas Reit which typically distribute 90-100 per cent of income to shareholders, Mr Au Yeung said CitySpring will stick to a policy of retaining about half of its cashflow.

‘Some of the cash which is left over, we feel it’s prudent to keep in the trust, to cater for business needs and unforeseen events,’ he said.

‘If we cut everything to the wire, there’s no margin for error and in today’s market with so much uncertainties, that’s not a good model.’ – Reuters