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K-Green Trust: A stable source of passive income.

Saturday, July 3, 2010


I spent some time recently looking into the latest trust to list in the stock market here: K-Green Trust (KGT). This is an infrastructure business trust listed by Keppel Corporation recently. Initially, it only has three assets:

1. Senoko Waste-to-Energy Plant
(Concession period: 15 years from 1 Sep 09)

2. Keppel Seghers Tuas Waste-to-Energy Plant
(Concession period: 25 years from 30 Oct 09)

3. Keppel Seghers Ulu Pandan NEWater Plant
(Concession period: 20 years from 28 March 07)

The Waste-to-Energy plants treat close to half of Singapore's incinerable waste while the NEWater plant is one of Singapore's largest.


The main attraction of this trust is the stability of its non-cyclical cash flows and a lack of counter-party risks as its customers are NEA and PUB.

Using the usual metrics for analysing trusts, we find that KGT has zero gearing, has an estimated dpu of 7.82c (which translates into a yield of 7.38% based on the last traded price of $1.06) and is currently trading at a 5.5% discount to its NAV of $1.12. Although the small discount to NAV is unattractive, the zero gearing is.  There is room for KGT to gear up to, say, 40% and improve its dpu in time.

Stable cash flow, low risk and room to grow.  This sounds like a good addition to my passive income portfolio. It diversifies my income stream and injects a higher level of stability at the same time. The lower yield is acceptable because of its debt free balance sheet.  When a balance sheet is heavy in debt, the risk is higher and, consequently, I would demand a higher yield.

I would like to buy some units of KGT but how much would I pay? On its first day of trading, KGT started off at $1.17 and hit a high of $1.33 and closed at $1.11. Usually, I would depend on TA here but being so new in its listing, four days old, to be exact, TA is impossible. However, we can see that it reached a low of $1.00 on 1 Jul and formed a white candle with a long upper wick on 2 Jul as it closed at $1.06.  This suggests some selling pressure.

Why the selling pressure? If we remember that KGT units were actually given to existing shareholders of Keppel Corporation as a special dividend, the reason becomes apparent. Some shareholders are monetising their "dividends".  If this continues to play out and if the buying interest does not strengthen to counter balance the selling pressure, KGT unit price could go lower.

I would be quite happy to collect some units at $1.00 which would give a yield of 7.82% to begin with.


K-Green Trust rated hold
Monday, 28 June 2010

16 comments:

Anonymous said...

http://utwt.blogspot.com/2010/06/keppel-corp-and-k-green-trust-things.html

Keppel Corp's K-Green Trust: Things for Investors to Note

views from under the willow tree

AK71 said...

Hi Anonymous,

Thanks for sharing. Could you leave your name or initials in future comments? Thanks. :)

la papillion said...

Hi AK,

Since you said it's a good buy, I'll look into it too :) But I wouldn't buy it now, I still don't like how the general market pans out. To me, 7++% is quite alright with me, which will put the entry price somewhere around the $1 mark. I'll say be patient and see if we can catch it.

Not dying to get anything now and happily reading on my kindle, haha :)

AK71 said...

Hi LP,

Yup, I think $1 would be a fair price to pay for a 7.82% yield. Lower than AA REIT but the risk is also lower. So, it's justifiable. :)

I am not in a hurry to load up either. If it does not hit $1, I would let it pass no matter what the analysts say.

Not spending a lot of time looking at the market because, over the weekend, I upgraded my home theatre system. Replaced my LCD TV with a Samsung HD LED TV and bought a SONY Blue Ray player! So, that's taking up quite a bit of my time now. Hehe... new toys! ;)

Anonymous said...

hi
i m anonymous
call me odie
=)

AK71 said...

Hi Odie,

I like Odie.. and Garfield. :-)

Thanks for dropping in to introduce yourself. That is pretty decent of you. Visit often. :)

la papillion said...

Hi AK,

Wah, you got yourself a brue lay! :) Fantastic :) You should go ebay to shop for brue lay movies, some are so much cheaper than what they are selling over here, with decent package and limited edition stuff too :)

I'm busy either reading my kindle, or playing games (got myself a new game!) or just plain sleeping. Suffering from a bout of horrible flu..sniff sniff

AK71 said...

Hi LP,

Aiyoh, I just bought 10 or so Blue Ray titles over the last two days! :-(

e-Bay? Really? You are an impressive treasure trove of information! I have never bought anything on e-Bay before. Reliable?

The flu bug is back. Drink more water and pop those Vitamin C pills. Works for me. :-)

la papillion said...

Hi AK,

Oops, forgot you're a technosaur :)

Okay, here's from Pat (vault dweller):
1. http://shop.ebay.com.sg/abundatrade/m.html?_nkw=blu-ray&_sacat=0&_odkw=&_osacat=0&bkBtn=&_trksid=p3911.m270.l1313

2. http://shop.ebay.com.sg/alphaflix_trading/m.html?_nkw=blu-ray&_sacat=0&_odkw=&_osacat=0&bkBtn=&_trksid=p3911.m270.l1313

You must also check this site to see if the disc are region coded: http://bluray.liesinc.net/

Ebay is definitely reliable. Esp when coupled with paypal. There are actual stores in ebay too and you can buy it online from there so it won't be auctioned. It's safe. Pat himself bought a few from the very same sellers.

Happy buying!

AK71 said...

Hi LP,

I bought some from MJ Multimedia at 2 for $70 which I think is pretty good value for money, right? Great Singapore Sale, they told me.

I am getting quite busy again at work and might not have much time for my new toys for a while. Might have to travel for work too but I will definitely check out the links you gave me! Thanks! :)

la papillion said...

Hi AK,

Haha, that's good value! Have a safe trip :)

AK71 said...

Hi LP,

I thought so too because I compared with EZ Videos and TS-Video, the GSS offer by MJ is good value but on selected titles only. For Chinese movies, Giant and Poh Kim actually have parallel imported Blu Ray discs from China going at $19.90 each.

Last night, I tried playing my Transformers movie DVD on the Blu Ray machine. Wow! There is a difference. I don't know if it is the Blu Ray player or if it is the HDMI cable (which the DVD player does not have) but the images are sharper and the sound better. Actually, it might just be the new HD1080 LED TV. Apparently there is a difference between HD1080 and normal HD.

I was tempted to do an elimination test by bringing out the old LDC TV (HD Ready) and DVD player and set up different configurations and testing one configuration at a time to see the difference. Crazy, isn't it? Too much work, I decided. I've grown older and lazier.

I am now wondering if I need to buy Blu Ray discs in future at all. Haha.. Just buy original (aka non-pirated) DVD titles and it's probably just as good?

Hope you are recovering well from flu. :)

jason said...

Hey AK71, there are loads of Blue Ray titles available in the hypermarts nowadays.....$15-$20 for English titles.....Giant, Carrefour...
So can go bananas in there. Even the pirated guys across the causeway have them for quite a while....i'm still on DVD format though.

la papillion said...

Hi AK,

Hmm, I think you should just try out a dvd on your new TV :) The LED tv is much better than normal, so I think both the blue ray and TV plays a big part :)

Oh, I've fully recovered, thanks!

AK71 said...

Hi Jason,

Hey, long time no see! I thought Blu Ray cannot be pirated. I guess I was mistaken. I was in Giant in Vivo and their Blu Ray titles are quite limited. So far, the MJ at Vivo has the largest wall of Blu Ray titles I've seen.

AK71 said...

Hi LP,

Yup, like I said, I tried out Transformers which was just a DVD and not Blu Ray. Impressed, I was. Hehe.. Just watched Pirates of the Caribbean (Curse of the Black Pearl) this evening on Blu Ray. Nice.

I think the LED TV definitely makes a difference. In case you are thinking of getting one, remember to get one that has HD1080p and not just plain old HD. The price difference is only $200 size for size in my case. Worth it. :)

Fully recovered? Good for you, pal, but I would still pop those Vit C pills if I were you. ;)

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