Saturday, August 16, 2008

CitySpring Infrastructure Trust

Launched in Feb 2007 in the Singapore Stock Exchange (SGX), CitySpring Infrastructure Trust was 48.7 times oversubscribed. The IPO was priced at S$0.89 then. Compared to current price of $0.79, the price has dropped by around S$0.10. Could this be a good investment opportunity in the current lacklustre Singapore stock market?

What I like about CitySpring Infrastructure Trust:

1. Strong sponsorship (Temasek)

2. Relatively stable (and boring) business, long term predictable growth.

3. High yield (roughly 8% at current price of S$0.79)

4. DPU has been increasing, asset growth

5. Good sector diversification in the form of water, electricity and gas.

What I don't like about CitySpring Infrastructure Trust:

1. Profits does not seem to be very high. Net profit mainly derived from income tax credit

2. Tariff management might be impacted by sudden change in fuel cost.

3. Basslink making a loss if not for income tax credit. Revenue also has not improved with Basslink acquisition.

4. Assets only in Singapore (51%) and Australia (49%)


CitySpring Infrastructure Trust ("CitySpring") is the first infrastructure business trust registered with the Monetary Authority of Singapore ("Authority"). As a pioneer in a new asset class in Singapore, and with sponsorship from Temasek Holdings (Private) Limited ("Temasek"), CitySpring aims to position itself as a leading player in a growing sector, by achieving significant growth through acquisitions. It has been established with the principal objective of investing in infrastructure assets and providing Unitholders with long-term, regular and predictable distributions and the potential for long-term capital growth.

CitySpring's portfolio comprises the following:

  • 100% of the City Gas Trust, currently the sole producer and retailer of town gas and the sole user of the low-pressure piped town gas network in Singapore,
  • 70% of the SingSpring Trust, the sole supplier of desalinated water to the Public Utilities Board in Singapore, and
  • 100% of Basslink, a direct current electricity interconnector between the States of Victoria and Tasmania in Australia.

Temasek currently holds 21.4% of the Units, making it the single largest Unitholder of CitySpring. Temasek presently intends to remain as CitySpring's single largest Unitholder and intends to position CitySpring as its key platform for infrastructure investments consistent with the business objectives of CitySpring.

Asset Portfolio
  • City Gas (100%)
    • Sole supplier and producer of town gas, as well as sole user of the low-pressure piped town gas network in Singapore
    • Strong position in the residential segment
    • Stable cash flow from a wide customer base of approximately 580,000 customers
    • Established track record with a reputation for reliability and safety
    • Customers benefit from the convenience of using town gas through City Gas
    • Strong management team with extensive experience in the gas and energy industry

  • SingSpring (70%)
    • Owns and operates Singapore�s first and only large-scale seawater desalination plant
    • The largest membrane-based seawater desalination plant in the world at the time of its completion
    • Long-term 20-year Water Purchase Agreement ("WPA") with the PUB
    • Access to an experienced O&M operator and the resources and capabilities of the Hyflux group
    • Awarded the Distinction Award for Desalination Plant of the Year by Global Water Intelligence UK in 2006

  • Basslink (100%)
    • A 370km high-voltage, direct current electricity interconnector between the States of Victoria and Tasmania in Australia
    • It enhances security of supply to Tasmania, and at the same time, enables Hydro Tasmania (the electricity generating company wholly owned by the State of Tasmania) to sell hydro electricity at peak pool prices and import electricity from Victoria at base load prices
    • Expected to provide long term, regular and predictable revenues from a long term contract with Hydro Tasmania based on the availability of the interconnector
    • Since commercial operations began in April 2006, Basslink has achieved an average availability of 99.5%
    • Incorporated in the Basslink interconnector is a fibre optic cable that enables Basslink to carry telecommunication traffic as well

Previous Distribution Data (Latest Distribution is 1.75 Singapore Cents)

Period Distribution Per Unit
(Singapore Cents)
Payment Date
1 January 2008 to 31 March 2008 1.60 27 June 2008
1 October 2007 to 31 December 2007 1.60 14 March 2008
1 July 2007 to 30 September 2007 1.60 14 December 2007
1 April 2007 to 30 June 2007 1.50 14 September 2007
12 February 2007 to 31 March 2007 0.78 15 June 2007


Safe Haven said...

Your insights make an interesting read. I think it is important to focus on the cash earnings generated by Cityspring and its ability to grow its cash distributions to unitholders. The accounting profits generated by business trusts are normally depressed by the fact that a lot of depreciation and amortisation costs sit on their P&L. I believe business trusts like Cityspring are structured such that they are highly tax efficient and have high cash flows so that they can pay out distributions year after year. As you rightly pointed out, Cityspring has been able to raise its DPU.

bk said...

Yes. Cityspring is really something to watch out for if one wants something that yields steady dividends.

I will however wait at the sidelines for this one. Maybe another year or two to observe their financial position.

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