SINGAPORE (Jan 23): UOB Kay Hian is maintaining its “buy” call on Keppel Infrastructure Trust with a target price of 61 cents.
In a Tuesday report, analyst Foo Zhiwei says, “This is premised on the successful disposal of Basslink, with the proceeds re-invested into an asset yielding 6%.”
The trust also announced its 4Q17 earnings result on Monday, posting DPU for the quarter remained unchanged at 0.93 cents, bringing total DPU for FY17 to 3.72 cents.
The results were as expected, though it came on the back of lower distributable cash flow of $30.8 million, 4% lesser y-o-y.
The group’s revenue increased by 3.9% to $158.1 million from 152.2 million a year ago, due to higher revenue from City Gas and Basslink, offset in part by lower revenue contributions from, the concessions, CityNet and Keppel Merlimau Cogen (KMC).
See: Keppel Infrastructure Trust reports flat 4Q DPU of 0.93 cent
Meanwhile, the trust’s management has not updated on the divestment of Basslink, but continues to evaluate options and reassures that they were not under pressure to sell the asset.
Hence, the management will bide its time and await a good offer.
“In spite of the Hydro Tasmania claim that it was entitled to a facility fee payment reduction for the breakdown, Basslink still continues to receive its facility payment in full since Sep-17,” says Foo.
The infrastructure segment remains competitive and challenging for the trust to secure an asset with a similar yield.
As such, the management will continue to evaluate opportunities, while sponsor Keppel Infrastructure will add the Marina East add the Marina East desalination plant to the right of first refusal (ROFR) pipeline upon completion in 2020.
As at 12.12pm, units in Keppel Infra Trust are trading at 58 cents or 1.9 times FY18 book with a dividend yield of 6.5%.
