CitySpring Infrastructure Trust

KK · Guru

CitySpring Infrastructure Trust

KK · Guru

I called CitySpring to ask abt their poor EPS. For FY08, there's a one-time payment of $25.294Mil for Income Tax. For FY09 onwards, it'll be much lower (but they refused to give me an est) - I chk the prospectus and it'll be at corporate tax 20% of profits. So, it looks like div payout may be sustainable after all, but also assuming that their profitability will grow above $27Mil (FY08 div) - $25.294Mil (FY08 1-time tax) + FY09 tax.

I'm going to apply for the IPO after all, altho' I think the chances will be very slim, with the mkt still so hot

ahkian · Member

From the same page, with Projection of (0.75c) loss for '07 and 1.1c profit for '08, it will have to come from a loss of ($2.2mil) to gain of $2.7mil. Revenue needs to increase from $41mil to $262mil.

Also mention, SingSpring's only customer is PUB and they are not to engage other customer due to capacity concerns.

That means they need to do very aggressive acquisitions.
Tax cuts?
Wonder if our utility bills are going to increase? :D

KK · Guru

On 1st look, CitySpring looks like the kind of stock that I like, esp. since it's an infrastructure fund (stable cash flow) that will pay 6.75% to 7.75% div for 2006-7. But, after taking a closer look (prompted by a post by "mojo" in Wallstraits forum) at the IPO prospectus,

1) PG74 - Projected EPS = -0.75cts (2007) and 1.1cts (2008)
So, the Q is where are they going to get the $$ to pay the div of 1ct (2007) and 6cts (2008) so that we can get the good div yield?

2) PG75 - Projected Cash Flow Statement
In answer to (1), I looked at their projected cash flow. It looks like the money for the div is going to come fm the funds raised during IPO! For 2008, the projected div payout is $27Mil, which will result in a net decrease of $24.6Mil and a bal of $9.6Mil. That means they won't hv enough cash to pay another 6cts ($27Mil) for 2009! As mentioned in (1), the EPS is only 1.1ct (Net Profit = $2.75Mil) for 2008.

Conclusion - CitySpring doesn't look like the usual boring infrastructure stk that'll provide me with a life time of good div yield. It looks like they are trying to package it as such, but only for 2007-8. CitySpring shld be viewed as more of a potential growth stk (thro' acquisitions) where the risks are very much higher for conservative investors like me. :D

Nevertheless, with Temasek as the "champion" for this IPO and the current super-bull mkt, the mkt will very likely go into a mad feeding frenzy for this stk. For me, it's a stag for this IPO and not for long term div yield :D

KK · Guru

IPO Fact Sheet

Company: CitySpring Infrastructure Trust

Issue Statistic

Offer size 321.75m units
Public Tranche 25.0m units
Placement Tranche 296.75m units
Over-allotment option 32.2m units
Price S$0.77 to S$0.89
NTA per share (post IPO) S$0.90 *
Forecast Yield: 6.7% (FY07) * 6.7% (FY08) *
Market Cap (post-IPO) S$400.5m *
Open for public offer 31 Jan 2007 (8 am)
Close for public offer 5 Feb 2007 (12 pm)
Price Determination: 5 Feb 2007
Trading 12 Feb 2007, 2.00p.m. (on “ready” basis)
Lead managers and underwriter Morgan Stanley & DBS
Principal shareholder (post-IPO) Temasek (28.5%)

(*): based on maximum offer price of S$0.89

Background
CitySpring Infrastructure Trust (“CitySpring”) is the first infrastructure business trust registered with the Monetary Authority of Singapore. As a pioneer in a new asset class in Singapore, and with sponsorship from Temasek Holdings Ltd., 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 initial portfolio will comprise 100% of the City Gas Trust, the sole producer and retailer of town gas and the sole user of the low-pressure piped town gas network in Singapore, and 70% of the SingSpring Trust, the sole supplier of desalinated water to the Public Utilities Board (PUB), Singapore’s national water agency.

Strategies

The Trustee-manager intends to invest in a diversified range of infrastructure businesses. While the Initial Businesses are located in Singapore, CitySpring will seek investment opportunities globally with a primary geographic focus on Asia, the Middle East, Australia and New Zealand. Its focus within the infrastructure sector will primarily be in:
- Utilities including facilities for the recycling, treatment, distribution and supply of water, as well as facilities for the generation, transmission, distribution, and supply of electricity and gas.
- Transportation/logistics including toll roads, railway, storage terminals, airports and seaports; and
- Communications including broadcast transmission infrastructure, satellite systems and terrestrial wireline and wireless networks.

Use of proceeds Based on maximum offer price from the issue of the units pursuant to offering and sponsor units (to Bartley Investment and Napier Investment), total proceeds will be S$400.5m, and will be used to:
1) S$118.3m - subscribe for units in City Gas Trust
2) S$35.0m – subscribe for units in SingSpring Trust
3) S$195.6m – subscribe for City Gas Notes
4) S$35.0m – subscribe for SingSpring Notes
5) S$15.9m – pay for issue expenses
6) S$0.7m – pay for CitySpring establishment costs and provide for working capital.

KK · Guru

BT, Published January 31, 2007

CitySpring may acquire Hyflux's plants in China

HYFLUX'S water-treatment plants along China's east coast could be the next assets to be acquired by CitySpring Infrastructure Trust, officials said yesterday at the IPO launch of the infrastructure fund.

CitySpring is offering 321.75 million units at 77-89 cents that will give investors a projected tax-free yield of 6.75-7.75 per cent for the year ending March 31, 2008.

Disclosing that Hyflux has given CitySpring the right of first refusal for its China plants, the trust's CEO Fai Au Yeung said: 'Even as we were preparing for the IPO, we reached out over the last several weeks to some corporations which we have relationships with.'

Mr Au Yeung cited the possible acquisition of the Hyflux plants as an example of infrastructure assets the trust has in the pipeline.

Hyflux indicated in December last year that it might sell the plants this year to a trust or via an initial share sale.

CEO Olivia Lum said back then: 'We are not an asset-heavy company, we are a technology company. This is one of the opportunities for us to realise the hidden value of these projects . . . and we have talked to bankers to evaluate different options.'

The 13 Hyflux projects include desalination, water and waste-water treatment and recycling plants. They are reportedly worth about $400 million after completion and will generate 25-30 years of recurring revenue of about $160 million to $170 million a year.

CitySpring will kick off with an initial $400 million portfolio comprising Singapore's sole town gas supplier and first and only large-scale seawater desalination plant.

The trust aims to raise between $248 million and $286 million 'pre-greenshoe' and between $273 million and $315 million 'post-greenshoe' from its IPO.

The greenshoe option allows underwriters to sell additional shares if demand is high. In CitySpring's case, the greenshoe component will come out of Temasek Holding's initial share.

Temasek will be the trust's single-largest unit-holder with a 28.5 cent stake. Other major investors are global funds Fidelity Investment Management (HK) and Indus Capital Partners, which will buy a total of 43 million units or 13.5 per cent of the offering. Fidelity will take 9 per cent and Indus 4.5 per cent.

Applications for CitySpring units at ATMs or through the websites of participating banks can be made from 8am today to 12pm on Feb 5. The units will trade in lots of 1,000 units and trading on the Singapore Exchange is expected to start at 2pm on Feb 12.

KK · Guru

BT, Published January 31, 2007

CitySpring eyes sale of S'pore gencos

It will get backing of sponsor Temasek which may co-invest in asset buys

THE upcoming sale of the three big Singapore generation companies and also LNG (liquefied natural gas) terminals - like the one which Singapore recently gave the go-ahead to build, as well as others overseas - are possible assets which the just-launched CitySpring Infrastructure Trust (CitySpring) will look at.

These possibilities to grow its portfolio were hinted at by chief executive officer Fai Au Yeung and chief financial officer Tong Yew Heng during a recent interview with BT.

Singapore investment company Temasek Holdings could hopefully put up the gencos - Tuas Power, Power Seraya and Senoko Power - for sale this year, Mr Tong told BT yesterday. And at a press conference yesterday, Mr Au Yeung confirmed that CitySpring was evaluating the possibility of buying into the gencos. 'But we have to see if they fit our criteria for stable cash flows,' he stressed.

Singapore's first infrastructure fund will be looking to acquire assets not just from Temasek and Temasek-linked companies (TLCs), but also others in Asia and the Middle East. It will also do so through public auctions of assets by MNCs and through private negotiated transactions.

'Essentially, the assets must meet our investment considerations like political risk and stable regulatory environment. The assets must also be yield-accretive so that they can provide unitholders with regular and predictable cash distributions, and have potential for long-term capital growth.' On CitySpring's 'war chest' to fund such acquisitions, Mr Au Yeung said: 'We do not have a blind pool of funds.' 'When we are successful in acquiring other assets, we will go to the market for funds for these, plus possible debt financing.'

Here, it will have the strong backing of sponsor Temasek, as 'in a case where there is no time for fund-raising, Temasek will close the deal first, then transfer the asset to CitySpring later', he said of some M&A deals which may need to be closed quickly.

As sponsor, Temasek could also co-invest in the assets. The Singapore investment company will also act as 'risk-taker' by acquiring assets which may be at an early stage where they have not yet generated regular and predictable cashflows. Temasek will 'warehouse' these first, and later give CitySpring an opportunity to take these over when they are more mature. Examples of these would be infrastructure projects in the Middle East, a region which is just opening up, and where there are a lot of greenfield projects which are not immediately suitable for CitySpring to acquire.

Australian assets may be more suitable, the officials indicated, although these pertain more to infrastructure like oil/gas pipelines and LNG terminals, rather than actual oil/gas exploration and production projects.

Temasek is especially strong in Asia - where some US$250 billion of infrastructure investments are needed annually - and this is where CitySpring sees robust growth potential. 'Temasek is right now looking at some businesses, which without CitySpring, they will not do,' Mr Au Yeung said, without disclosing specifics.

'Geographically, Singapore currently accounts for 100 per cent of our portfolio, and going forward we expect it to continue to still form a large part of it,' he added. CitySpring chose to start out with the assets - worth almost S$400 million - of 100 per cent of City Gas Trust and 70 per cent of SingSpring Trust, as both provide stable, long-term returns.

'City Gas which supplies town gas to over 580,000 customers here will have no real competition for a while. SingSpring's desalination plant has a 20-year water purchase agreement with the PUB, under which it gets the same cashflow regardless of the volume of water supplied,' Mr Tong said. This is because it makes available the full 136,380 cu m per day capacity of the plant to PUB.

Beyond utilities, it will also consider transportation/logistics assets like toll roads, railways, airports and seaports, and also communications assets like broadcast transmission, satellite systems and terrestrial wireline and wireless networks.

KK · Guru

BT, January 30, 2007, 2.20 pm

CitySpring Trust narrows IPO price range

SINGAPORE - CitySpring Infrastructure Trust, which is backed by Singapore's Temasek Holdings, has set an indicative price range of $0.77 to $0.89 a unit for its IPO, according to its prospectus. The trust is selling 321.75 million units and would raise as much as $286 million (US$186 million) in the IPO. The official range is narrower than the range of $0.75 to $0.89 a unit that a banking source revealed earlier to Reuters. The trust will be priced on Feb 5 and listed on Feb 12.

The prospectus said CitySpring has attracted two cornerstone investors for a combined 9.7 per cent stake, confirming an earlier Reuters story. Fidelity Investments Management (Hong Kong) and Indus Capital Partners LLC have agreed to buy 43.44 million units in CitySpring, which is set to own Singapore's sole producer and retailer of town gas as well as a desalination plant in Singapore once the IPO is completed.

Temasek Holdings will hold 28.5 per cent in CitySpring, which will be Singapore's second listed infrastructure trust after Macquarie International Infrastructure Trust. -- REUTERS

KK · Guru

BT, Published January 25, 2007

CitySpring's funding raises concerns

WHAT do Keppel Corp, SMRT, PSA International and SingTel have in common? All familiar names, each owns infrastructural assets critical to Singapore's everyday social and economic activity. They now also have a potential avenue to divest assets through the CitySpring Infrastructure Trust, a fund seeking a listing on the Singapore Exchange (SGX) that is sponsored by their parent Temasek Holdings.

It seems clear that CitySpring intends to grow by acquisition. Yet the initial public offering (IPO) is likely to be of limited size, which means CitySpring will rely on secondary issues to fund purchases. IPO investors should consider the implications.

CitySpring's distribution per unit for period from February 2006 to March 2007 is projected at only 0.96 cents, based on a projected income of $4.3 million divided by 450 million units. For the year ending in March 2008, the projected yield is six times higher - it will come to six cents per unit, based on a projected income of $27 million.

Further, projected revenues multiply from $41.7 million in the period from February 2006 to March 2007, to $262 million for the year ending March 2008.

Judging from the trust's initial stable and not terribly exciting assets - City Gas, Singapore's sole retailer of town gas, and SingSpring, its first desalination plant - growth will not be organic.

In its prospectus, CitySpring hints where acquisitions might come from. Its strategy is to invest in infrastructure assets in three sectors - utilities, transport and logistics, and telecommunications - focused in Asia, the Middle East, Australia and New Zealand.

Later, it lists sponsor Temasek's major infrastructure holdings, perhaps hinting at what is to come. Under utilities are Singapore Power, SembCorb Industries and Keppel Corp. Under transport and logistics are PSA International and SMRT Corp. Under telecoms, SingTel and ST Telemedia - which owns Starhub - are noted. For these firms, CitySpring may prove a convenient vehicle to lighten balance sheets and improve liquidity ratios. Investors in these companies may read the trust's listing as a positive sign.

For CitiSpring itself, the question is how it will fund future acquisitions. According to the preliminary prospectus, only $0.7 million of the proceeds will go towards working capital and establishment costs. Most of the net proceeds will be used to acquire units in and notes of City Gas and SingSpring, the trust's initial assets, with little left over. Debt financing may cover part of later acquisitions, but it is unclear how high CitySpring's gearing will be after it snaps up City Gas and SingSpring. The trust will acquire 100 per cent of City Gas, which has total assets of $222.2 million and net assets of about $160.9 million, and 70 per cent of SingSpring, which owns total assets of $223.3 million and net assets of $9.1 million.

A check with CitySpring confirmed that the trust's IPO capital is not a war chest to be saved for future purchases and it will depend on secondary rights issues to raise money each time it eyes a new target. This raises a few questions. First, will IPO investors face the risk of dilution from secondary issues? The risk will be lower if they get preference for future rights issues; but if secondary issues are sold through private placement, dilution is certain. Second, why has CitySpring chosen to raise only a small amount upfront, instead of raising a large sum of capital at the beginning, and using debt to finance further acquisitions? Backed by Temasek, a triple-A rated investment firm, its cost of debt is likely to be low. If it borrows at a low interest rate to fund a purchase that gives a high yield, the purchase is immediately yield-accretive. Conversely, funding a purchase by raising equity capital - which implies a higher cost of capital as well as incurring fees - may not be so cheap.

The financing decision would be easier to understand if CitySpring did not have any acquisitions on the horizon. But if there are several in the pipeline, why not raise a large sum upfront? Still, shareholders have the chance to vote on CitySpring's subsequent capital raising measures for particular purchases. As such, retail investors might want to consider if major post-IPO shareholders in CitySpring might vote for decisions that run counter to minorities' interests.

Granted, the trust's performance will depend on the quality of its acquired assets. On that front, given Singapore's stability and relative prosperity, and Temasek's stable of assets, there is little to doubt for now.

KK · Guru

BT, Published January 10, 2007

Temasek plans to take S'pore's first infrastructure fund public

Initial assets worth $400m comprise town gas supplier, desalination plant

TEMASEK Holdings is setting up Singapore's first infrastructure fund, CitySpring Infrastructure Trust (CitySpring), and taking it public as well. The fund comprises initially the assets - worth almost S$400 million - of the republic's sole town gas supplier and its first and only large-scale seawater desalination plant.

The Singapore investment company plans to sell 321.75 million units in CitySpring through a placement and public offering sometime this year, but did not give the pricing. Temasek said that it eventually intends to position CitySpring as its key platform for future infrastructure investments in Asia, Middle East, Australia and New Zealand.

Announcing this yesterday, Temasek said that its subsidiary, CitySpring Infrastructure Management, has lodged a preliminary prospectus with the Monetary Authority of Singapore for the proposed initial public offer of CitySpring and its proposed listing on the Singapore Exchange Securities Trading Limited.

The initial portfolio of CitySpring will comprise 100 per cent of City Gas Trust and 70 per cent of SingSpring Trust.

City Gas Trust will acquire the business undertaking of City Gas, which is the sole producer and retailer of town gas and which currently has the sole licence for retailing town gas here.

SingSpring Trust will acquire the business of SingSpring which owns and operates the republic's first and only large-scale seawater desalination plant, one of the largest membrane-based desalination plants in the world. The 136,380 cu m per day plant, operational since end-2005, has a 20-year water purchase agreement with the PUB.

Temasek declined to specify the value of the gas and water assets which will come under CitySpring, but a rough estimate puts it at at least S$372 million. CityGas' assets, according to its latest annual report, was worth S$219.3 million as at March 31, 2004.

SingSpring had assets worth S$218.3 million as at Dec 31, 2005 - with 70 per cent of this worth S$152.8 million. Separately, water treatment firm Hyflux said yesterday that it plans to sell part of its interest in its desalination plant SingSpring to CitySpring.

Temasek, with an investment portfolio worth S$129 billion, said that CitySpring will seek to invest in infrastructure assets which will 'provide unitholders with regular and predictable distributions, with the potential for long-term capital growth.' Mr Fai Au Yeung, the CEO of trustee-manager CitySpring Infrastructure Management, said, 'There is strong growth potential in the infrastructure industry in Asia. The Asian Development Bank estimates that Asia will require US$250 billion per annum until 2010 to fund new infrastructure investment and to maintain existing facilities.' 'Economic development and rapid urbanisation have put increasing strain on many countries' infrastructure, resulting in investment opportunities in many sectors, including utilities, transportation and communications. CitySpring intends to tap these opportunities and invest in a diversified range of infrastructure businesses,' he added.

Temasek, as sponsor of the infrastructure trust fund, will hold 28.5 per cent of the units upon listing, making it the single largest unitholder. It intends to remain CitySpring's single largest unitholder. Temasek managing director Margaret Lui said that 'Temasek will support CitySpring through our international reach and business network in the sourcing for acquisition opportunities,' adding that 'we intend to co-invest in infrastructure assets with CitySpring where appropriate.' Temasek said that it also intends to enhance CitySpring's pipeline of acquisition opportunities by acquiring infrastructure assets 'which may be at an early stage where they have not yet generated regular and predictable cashflows', and giving the latter an opportunity to acquire these when they are more mature.

Morgan Stanley and DBS Bank are advising CitySpring.