KGT – AmFraser

An insipid growth story. Q313 remains an unexciting quarter for KGreen Trust (KGT). The only catalyst for growth, that is acquisitions, remains nowhere in sight as we continue to witness KGT’s sliding net asset value (NAV).

Results stable, yet uninspiring. KGT delivered revenue of S$17.1mil and net profit of S$3.8mil in Q313, which are ‐1.7% and ‐4.2% lower than our projections respectively. Operation and maintenance (O&M) income continued to form the bulk of overall revenue at 74.9%, with future increases remaining dependent on annual adjustments of O&M and power tariffs to account for changes in consumer price index and fuel price.

Inching towards its first concession expiry. KGT is now another step closer to facing its first concession expiry on its Senoko Plant in 2024. Remaining concession agreements for the Ulu Pandan Plant and Tuas DBOO Plant are due for expiry in 2027 and 2034 respectively. We understand that these concession agreements are unlikely to be renewed.

Zero NAV the end‐game. We reiterate the declining NAV story of KGT. KGT’s assets are recognized as service concession receivables, that represents the right to receive fixed and determinable amounts of payments from its customers NEA and PUB over the concession period. Naturally, these service concession receivables will gradually decline over time as KGT receives its payments. KGT’s NAV of 99c per

share represents an all‐time low as at 30 Sep 2013.

Reiterate SELL. Since our initiation on 15 Apr 2013, KGT is down 9% and is currently trading at S$1.02. At current levels, we believe investors have yet to fully price in the investment negatives of KGT. With an unchanged fair value of S$0.78, we reiterate our SELL call on KGT.