Summary of Keppel Infrastructure Trust’s 1H24 results

Keppel Infrastructure Trust (KIT) reported its results and dividends for the first half of 2024 (1H24).

• KIT declared a 1H24 distribution of 1.95 cents per unit, 1.1% higher than 1H23. 
• This translates into annualized distribution yield of 8.2%. 
• DPU was in line with our expectation of 3.86 cents for the full year.

The total distribution is S$110m, 20% above distributable income (DI) of S$91m. DI was 31.5% lower than 1H23 due to delayed cost-recovery at City Energy to 2H24, debt amortization and other one-off items. Excluding the one-off items, DI was S$117.8m. 

Operationally, KIT reported net loss of S$23.9m, from net profit of S$39.5m in 1H23. This was due to lower revenue, higher finance costs, trustee-manager’s fees and other losses from exchange differences, asset disposal and impairment. Funds from operations fell 12.7% year-on-year to S$139m. 

Revenue decline of 5.8% was dragged down by 12.0% decline at Ixom and lower distribution income from Aramco Gas Pipelines Company (AGPC), partly offset by 1-month contribution from Ventura (S$21.7m). Ixom’s operations was impacted by lower commodity prices and weaker A$ versus S$. 

Finance costs increased 5.9% to S$88.3m with higher interest rates and Ixom took on more debt in FY23 after the recapitalization exercise. 

Net gearing is 44.7% (1Q24: 41.1%), but net debt to EBITDA is manageable at 6.5x. About 65.3% of debt is at fixed rate or hedged. 

Weighted average cost of borrowings rose to 4.43% (1Q24: 4.37%).  We have assumed an effective interest rate of 5% in FY24E and 4.5% in FY25E in our earnings projections. 

As a business trust, KIT has no gearing restrictions and is allowed to pay distributions out of retained cash and residual cash flows, in accordance with its distribution policy.

What would Beansprout do?

We expect Distributable Income (DI) in 2H24 to be stronger, driven by cost recovery at City Energy, a full 6-month contributions from German Solar Portfolio, Ventura and Keppel Merlimau Cogen Plant. Therefore, DPU is sustainable in 2H24.

We maintain our BUY call and DDM-derived TP of S$0.59, based on weighted average cost of capital of 9% and terminal growth rate of 2%. This assumes no new acquisition and equity raising.  At this price, distribution yield would be 6.6% and 6.9% for FY24E and FY25E, respectively. 

KIT is trading at current distribution yield of 8.2% and 8.6% for FY24E and FY25E, respectively.

Download the full report in PDF here. 

Related links:

• Keppel Infrastructure Trust share price and share price target
• Keppel Infrastructure Trust dividend forecast and dividend history

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