• While net profit of $8.726 mln for period from June 29th to Dec 31st ’10 was 22% above management’s guidance at the time of the IPO last June, distribution is only 10% above at 4.31 cents (8.44 cents annualized), suggesting management is conserving cash ($ mln at end Dec ’10)

• The main contributing factor for the 22% lower than-expected decline in Revenue is the “shift in schedule” of the upgrading works at the Senoko plant. Management said the upgrade is on schedule for completion by June 2012.

• The annualized yield of 7.7% continues to merit a BUY, although pressure is on management to make acquisitions soon, to arrest the slide in the unit price from debut high of $1.16 to recent low of $1.04. Fact remains KGT has zero debt.

K-Green profit after listing beats forecast

DPU from listing date to year-end 4.31cents, 10.2% higher than 3.91cents forecast

K-GREEN Trust has posted a net profit of $8.73 million for the period from its listing on June 29 to Dec 31, 2010, 22 per cent higher than forecast.

Including the net profit of $847,000 for the period Jan 1 to June 28, 2010, when it was a private trust, full-year net profit for the green infrastructure assets trust came to $9.57 million.

Full-year revenue was $65.8 million, while revenue garnered since listing was $49.3 million.

The latter is 22.1 per cent lower than the forecast of $63.3 million, mainly due to lower contributions from a delay in flue gas upgrading works for K-Green’s Senoko Waste-to-Energy Plant.

K-Green holds two other plants: the Keppel Seghers Tuas WTE Plant and the Ulu Pandan NEWater Plant.

The majority of K-Green’s full-year revenue – $35.3 million – came from the operation and management of its three plants. The Senoko Plant flue gas upgrade brought in another $16.5 million.

Distribution per unit (DPU) for K-Green from the listing date to the year-end was 4.31 cents, 10.2 per cent higher than K-Green’s forecast of 3.91 cents. K-Green said its annualised distribution yield stands at 7.9 per cent, based on a unit closing price of $1.07 on Dec 31, 2010.

K-Green disclosed its earnings per unit from the date of listing to Dec 31 is 1.39 cents. As at Dec 31, 2010, net asset value per unit for the group – which includes the performance of the holding company, K-Green and the three plants – stands at $1.16.

K-Green has said it will add more assets to its holdings, understandably from regions where it has a focus in ‘Asia, Europe and the Middle East’.

Said Thomas Pang, CEO of Keppel Infrastructure Fund Management, trustee-manager of K-Green Trust: ‘The growing sustainable development sector now and in the foreseeable future will drive demand for waste management, water and wastewater treatment, renewable energy, energy efficiency and other green initiatives.

‘K-Green Trust will be well positioned to evaluate these opportunities to grow our asset base.’

K-Green Trust ended trading up 2 cents to $1.10 yesterday.

K-Green Trust posts $4.4m profit in Q3

K-GREEN Trust posted a third-quarter net profit of $4.4 million yesterday. Because the business trust was listed on the Singapore Exchange on June 29, the group also reported its net profit thus far (June 29-Sept 30), which stood at $4.57 million, 26.5 per cent higher than a pro-rated forecast of $3.61 million.

Revenue for June 29-Sept 30 was $26.5 million, 17.1 per cent lower than projected. ‘This was mainly due to a shift in schedule of the flue gas upgrading works for Senoko Plant, leading to lower recognition of EPC revenue by $6.3 million,’ said K-Green. Construction expense was correspondingly also lower than projected. Also lower than forecast were trust and ‘other operating’ expenses.

For the third quarter, K-Green recorded revenues of $26.1 million. This comprised construction revenue of $10 million, finance income of $4.65 million and operation and maintenance income of $11.45 million.

The group, whose objective is to invest in ‘green’ infrastructure assets, currently holds three plants – the Senoko Waste-to-Energy (WTE) Plant, the Keppel Seghers Tuas WTE Plant and the Ulu Pandan NEWater Plant. Keppel intends to add other assets to the trust.

Earnings per share for K-Green for the third quarter was 0.7 cent. EPS from its date of listing to Sept 30 was 0.73 cent.

K-Green’s shareholders are mostly entitled Keppel Corporation shareholders, who received one K-Green unit with an implied value of $1.13 for every five Keppel shares held. K-Green’s shares represent a part of Keppel’s proposed dividend in specie of 61 cents for FY2009. The distributed K-Green units represent 51 per cent of the trust’s units. K-Green’s sponsor, Keppel Integrated Engineering Limited, owns 49 per cent of the units.

Net asset value per unit as at Sept 30 was $1.15. K-Green units gained one cent to close at $1.10 yesterday.

K-Green sees solid first day

Keppel’s trust is the fourth most active stock with 33.6m shares traded

SINGAPORE’S first green infrastructure trust, K-Green Trust, put in a robust performance in the opening hours of its debut yesterday, before slipping to close lower.

The Singapore Exchange (SGX) said that it welcomed the new listing.

K-Green, Keppel Corp’s trust targeted at investing in green infrastructure projects here and globally, touched a high of $1.33 within the first half hour of its trading debut. It then slipped to close the day at $1.11.

The counter saw strong volumes yesterday, being the fourth most active, with a total of 33.6 million units changing hands.

‘Investors are keen on buying the stock mostly because of its good dividend yield and long-term prospects for the green business,’ a local trader told Reuters.

DBS Vickers has rated K-Green a ‘hold’, with a 12-month target price of $1.20.

K-Green owns three assets: the Senoko Waste-to-Energy Plant, the Keppel Seghers Tuas Waste-to-Energy Plant and the Ulu Pandan NEWater Plant. The Senoko and Keppel Seghers plants treat close to half of Singapore’s incinerable waste.

Keppel has said that K-Green’s objective is to invest in ‘green’ infrastructure assets in Singapore and globally, with a focus on Asia, Europe and the Middle East. The trust aims to provide ‘long-term, regular and predictable distributions to its unit holders’.

K-Green’s pro forma net book value, as at June 29, 2010, was about $719.4 million.

Thomas Pang, CEO of Keppel Infrastructure Fund Management Pte Ltd, trustee manager of K-Green Trust, said: ‘With growing awareness in environmental issues worldwide, there is greater demand for ‘green’ infrastructure assets. K-Green Trust is well-placed to capture these opportunities in the global drive towards sustainable development, therefore offering investors opportunities to participate directly in this growing market segment.’

Keppel did not raise any new funds with this listing. Instead, it distributed 325.9 million units in K-Green Trust to entitled shareholders of Keppel – one unit for every five Keppel shares held. The units had an implied value of $1.13 each.

This proposed dividend in specie forms part of Keppel’s total dividend of 61 cents per share that it is proposing to offer to shareholders for FY2009.

The distributed K-Green units represent 50.5 per cent of the total number of trust units. The remaining stake is held by K-Green’s sponsor, Keppel Integrated Engineering Limited.

A statement from the SGX after the close of trade yesterday said that it welcomed K-Green to the market. ‘It underlines our attractiveness as a listing venue for the fast growing sector of infrastructure assets in Asia,’ said Lawrence Wong, executive vice-president and head of listings at SGX.

According to SGX’s statement, K-Green is expected to have an estimated market capitalisation of $730 million.

Its listing brings the total number of infrastructure business trusts on SGX to three, with a combined market capitalisation of close to $1.5 billion.

Green is the colour of Cash

• "Green" assets with steady long term cash flow

• Zero debt balance sheet will enable growth

• However, growth pipeline is limited at this point

• Projected DPU yield of 6.9% not far from peers; initiate coverage with HOLD and TP of S$1.20

Stable, long-term cash flows. The initial portfolio of KGreen Trust ("KGT") consists of two Waste-to-Energy (incineration) plants as well as a water recycling (NEWater) plant in Singapore, with concession terms ranging from 15-25 years. The net cash flow generated will mostly comprise availability payments i.e. the fixed part of total payments, which will be paid as long as the contracted treatment capacity is made available, irrespective of actual volume treated. Counterparty risk is also minimal as off-takers are Singapore Government entities. Management has projected a DPU of 3.91Scts for the 6 months of FY10 and 7.82Scts for FY11, implying an yield of close to 7% at listing price.

Zero debt balance sheet could support inorganic growth. While the potential for organic growth is limited, the Trust does have the balance sheet flexibility to pursue inorganic growth, as it is debt-free at the time of listing. The Sponsor has provided a pipeline of 4 assets as part of Rights of First Refusal ("ROFR") deed, but these assets will need to be warehoused by the Sponsor until they are operationally stable, and the smaller size of the ROFR portfolio means that even injection of the whole portfolio would only potentially enhance FY11 DPU by less than 5%.

HOLD, for now. Given its debt-free balance sheet and steadier non-cyclical cash flows than some peers, we expect KGT could trade at a slight premium to other infrastructure business trusts. Given the historical trading ranges of peers, we believe KGT could trade between 6-8% target yield, which would imply a share price range of S$0.98 – S$1.30. Our valuation, based on a slight premium to peers (6.5% target yield) is S$1.20. Initiate with HOLD, catalysts could come from a larger and more visible acquisition pipeline.