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Background:
K-Green Trust (KGT) is a business trust with a focus on “green” infrastructure assets. It aims to provide long-term, regular and predictable distributions to unitholders. It was spun off from Keppel Corp, which continues to manage the trust and holds a 49% stake. Currently, all KGT’s assets are in Singapore, but it intends to invest in suitable projects globally.
Recent development:
Since its spin-off and inception in mid-2010, KGT’s price has declined by 7%. However, it has been relatively resilient over the past month in the wake of the market pullback, with projected yields still attractive at 6.9%. It has also handily outperformed the much higher-profile HPH Trust.
Key ratios…
Price-to-earnings: na
Price-to-NTA: 0.9x
Dividend per share / yield: $0.063 / 5.8%
Net cash/(debt) per share: $0.11
Net cash as % of market cap: 10%
Share price S$1.075
Issued units (m) 629.8
Market cap (S$m) 677.0
Free float (%) 50.5
Recent fundraising Nil
Financial YE December 31
Major shareholders Keppel Corp – 49.5%
YTD change -0.5%
52-wk price range S$1.00-1.18
Our view:
Quick recap of assets. Keppel Integrated Engineering (KIE) is the sponsor for K-Green Trust. The three seed assets for the trust are the Senoko Waste-to-Energy (WTE) incineration plant, the Keppel Seghers Tuas WTE Plant and the Ulu Pandan NEWater plant. The Singapore government is the customer for all three assets.
Stable contracts. Senoko produces 36MW of green electrical energy per day, and has a contract to provide incineration services to the National Environment Agency (NEA) for 15 years. Tuas WTE has the capability to treat 800 tonnes of solid waste a day to generate more than 20MW of green energy, and has a contract with the NEA for 25 years. The NEWater plant can produce 148,000m³ a day.
5-7% yield. KGT reaffirmed its expectation for the DPU for 1H11 to be on track with the forecast DPU of 3.13 cents, with a projected annual yield of 6.9%. Its value is also supported by its last reported NAV of $1.12 per unit.
Offers stable returns. Compared to the other infrastructure trusts listed in Singapore, KGT’s returns and performance have been consistent and high-yielding, despite its unexciting price movement. The trust still offers an excellent platform for investors looking for stable returns.
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