Brokers' take

Keppel Infrastructure Trust | Buy Jan 23 close: S$0.58 Target price: S$0.60 DBS Group Research, Jan 23

Keppel Infrastructure Trust (KIT) maintained its record of steady distribution per unit (DPU) of 0.93 Singapore cent in Q4 2017, as expected. KIT generated distributable cash flow of S$30.8 million in Q4 2017, slightly lower than expected due to a time lag between tariff adjustments and costs at City Gas and one-off maintenance costs at the Ulu Pandan plant. Most of KIT's assets derive revenue from availability-based payments, independent of actual offtake. Hence, cash flows are highly predictable and not exposed to economic cycles. Concession agreements are long term in nature, of up to 20 years, and mostly with government entities, thereby minimising risk.

Sale of the underperforming Basslink asset would remove sentiment overhang. We also look forward to the trust kicking off its mergers and acquisition ambitions in FY18.