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Keppel and CitySpring Trusts: An unequal marriage?

Monday, November 24, 2014

I got into K-Green Trust (now renamed Keppel Infrastructure Trust) a few years ago at $1.11 per unit. I was attracted by its zero gearing and relatively decent distribution yield.

Over time, I received a DPU of almost 8c a year from K-Green Trust. So, with a closing price of $1.09 per unit in the last trading session, I have achieved a return of about 7% per annum which is not too bad for an income investment.

With zero gearing, together with other unit holders, I was waiting for K-Green Trust to gear up and acquire some DPU accretive investments but after waiting for 4 years, nothing really happened. Well, that is not until now.

Honestly, I don't have good feelings towards the merger of K-Green Trust and CitySpring Infrastructure Trust. To be honest, again, this probably has to do with the experience I had with CitySpring and I shared my thoughts here in my blog many years ago.

It would have been much cleaner for K-Green Trust, which I believe to be stronger financially than CitySpring, to acquire assets on its own and grow its DPU. The merger complicates things. Well, at least, it does for me. The first thought that came to my mind is that CitySpring's weaker balance sheet will strengthen with the merger.

Granted that K-Green Trust's assets have limited lifespans but it is like a good cup of coffee that is slowly being finished. We just have to top it up with more good coffee. CitySpring, to me, is coffee that is not so good. Now, these two cups of coffee are being mixed up.

It is easy to see that K-Green Trust has had a better track record compared to CitySpring's in the last few years. CitySpring has had two rights issues and seen its DPU reduced by more than 50% in the process over the years. What? They took more money from unit holders and it resulted in less income distribution per unit? Pui!

Now, with the proposed merger, existing unit holders of K-Green Trust will receive 2.106 new CitySpring units for every K-Green Trust unit owned. Oh, my. I am going to be a unit holder of CitySpring's again after so many years?

I lack the inclination to dig into the numbers as I am disappointed and flabbergasted by K-Green Trust's decision to give up its strong balance sheet by merging with CitySpring. There is no need to, in my opinion.

So, although it could be a mistake because I might not be able to see the big picture that more savvy investors are able to see, I will probably be saying good-bye to my investment in K-Green Trust, taking advantage of its higher unit price as a result of somewhat positive sentiments.

Out of sight and out of mind. Zen.

Related posts:
1. CitySpring Infrastructure Trust: Divestment.
2. K-Green Trust: Zzzzzzzzzz.


Vincent said...

I read in the paper this morning that the CEO of K-Green Trust will stay as the CEO of the newly merged entity. The CEO of Cityspring will be re-deployed elsewhere within Keppel Group. I don't know if this piece of news is of any consolation to you.

AK71 said...

Hi Vincent,

It is like Obama inheriting problems left by Bush. ;p

Anyway, I am not impressed by the CEO of K-Green Trust either. He sat on his butts and did nothing to grow DPU for 4 years. I like K-Green Trust's balance sheet and the potential it had, not the CEO.

Singapore Man of Leisure said...


Not many revisit the reasons they bought in the first place.

You are not one of them ;)

Quitting when you are ahead, and quitting when you are behind - they are not the same ;)

E H said...

If you find no good reasons to hold on to the counter, I rather you sell and redeploy your cash. Or bump up your war chest.

AK71 said...


I try my best to stay rational. Sometimes, I do a good job of it. Sometimes, I don't. -.-"

The decision to say "good-bye" here possibly has an emotive element, to be quite honest. ;p

AK71 said...

Hi E H,

Yup, already significantly invested, it is never a bad idea to have more cash on hand. ;)

iwimsasl said...

Did I told u KGT isn't a good stock to invest in during one of the meeting...SPH a few years back? Was it you?

AK71 said...

Hi iwimsasl,

I don't know who you are, I am afraid. So, I cannot say if I discussed KGT and SPH in a meeting with you a few years ago.

iwimsasl said...

Yup, we dun know each other actually.
I met this gentleman(we sat together) during the EGM for SPH Reits spin-off. He was active & even participate in Q&A to ask mgmt about giving direct reits shares to Sph shareholders instead of 18cts special dividends. It just came suddenly and I though he was you base on 3 shares - Sph, St Engg & K-Green he also have on his portfolio and that's when he asked me why KGT isn't a good share to invest for yield.

AK71 said...

Hi iwimsasl,

Thanks for the clarification. Definitely not me then. I have not attended any meeting called by SPH before in all the years I have been a shareholder. ;p

iwimsasl said...

No problem as i started it first, paiseh.
Nice post here, v. informative for pple who aim for FF. I noticed your style and mine are quite similar to achieve FF and you've succeeded but I'm still wip... but soon. Good Nite!

AK71 said...

CitySpring Infrastructure Trust:

7.3 per cent drop in revenue to S$120 million, hurt by lower contributions from its City Gas, SingSpring and CityNet segments.

For the quarter, the trust posted cash losses of S$13.5 million, a reversal from cash earnings of S$14.7 million a year ago.

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