Cityspring Infrastructure Trust

[greengiraffe]

This arrangement is very clearly a takeover of CIT by KIT, with the combined entity to be named KIT, while KI/KIFM will be sponsor/trustee-manager.

Nonetheless, the story is (1) CIT to accquire KIT by issuing XXX new units, (2) Combined entity will change name to KIT --> I just wonder, is there any reason for the difference in how the story is told vs how things actually are (takeover of CIT) ?

Lower yield fund acquiring a higher yield fund sounds more normal since it is an accretive acquisition.
KIT shareholders will be fuming if KIT is acquiring CIT and results in a drop in yield.

Although in actual fact, KIT is in the driver seat.

The current price is 54cts and CIT shareholders will get one-off distribution of 0.0303 cts in all. So, currently, the investors are paying 51cts for 3.67cts dividend. The yield is 7.2%. Not too bad for an infra fund.

On paper, it is a one-off accretive and related party transaction.

Going forward, it will be important to see if it can continue to do so and if there are sufficient pipeline from sponsors. Sponsors may include Sembcorp Ind since SCI is more active with infrastructure as its core.

Having said all that, on a global basis most of the lucrative non-toll road infrastructure projects have gone the Private Equity route ever since Macquarie Bank has delisted its highly reputed infrastructure vehicles post GFC.

CS appears to be a vehicle of yester-bubble when infrastructure trusts were the fad at the peak of last bullrun.

GG

In the news recently last month or so, there was something about Singapore becoming the center of excellence for ASEAN infrastructure fund.

Makes me wonder is there any connection.

Edit: its Asian Infrastructure Investment Bank news on channelnesasia on 5 Nov 2014. Go google. Where I read that singapore is the Center of excellence . ( using xiaomu can't paste link here don't know how)

Infrastructure developments take a long time... after completion needs to be stablised and incubated till returns optimised b4 injecting into trusts. If you look at Kep Corp announcement:

http://infopub.sgx.com/FileOpen/KCL_Anno...eID=325210

The purchase consideration for the Relevant Stake is S$510 million, comprising S$255 million
for the Sale Shares and S$255 million for interest-bearing notes (“Notes”) to be issued by KMC
to KIT. The purchase consideration is payable wholly in cash and was negotiated on a willingbuyer
and willing-seller basis between Keppel Energy and KIFM based on an enterprise value
of S$1.7 billion for KMC, less a S$700 million loan1, having regard to the future cash-flows to
be generated by KMC after the restructuring exercise (as further explained below) and the risk
profile of KMC as an entity post-restructuring. As at 31 December 2013, the book value and net
tangible asset value of the Sale Shares were both S$77.36 million.

The immediate winner is Kep Corp. If terms of acquired assets not good, then Business Trusts will suffer indigestion...

That explains why apart from income, there is hardly any performances for most business trusts post listing on SGX so far...

Very convincing yet confusing

GG

[structuredfinancier]

This arrangement is very clearly a takeover of CIT by KIT, with the combined entity to be named KIT, while KI/KIFM will be sponsor/trustee-manager.

Nonetheless, the story is (1) CIT to accquire KIT by issuing XXX new units, (2) Combined entity will change name to KIT --> I just wonder, is there any reason for the difference in how the story is told vs how things actually are (takeover of CIT) ?

Lower yield fund acquiring a higher yield fund sounds more normal since it is an accretive acquisition.
KIT shareholders will be fuming if KIT is acquiring CIT and results in a drop in yield.

Although in actual fact, KIT is in the driver seat.

The current price is 54cts and CIT shareholders will get one-off distribution of 0.0303 cts in all. So, currently, the investors are paying 51cts for 3.67cts dividend. The yield is 7.2%. Not too bad for an infra fund.

Just double checking, should the one off distribution for CIT shareholders be 0.02479 cts instead - 0.198cts + (0.105 cts divided by the swap ratio of 2.106) ?

Nonetheless, that still works out to be > 7%.

There has been a lot of activity within Singapore solar space in the last 2 years. That may potentially be a space that KIT can explore in the near future.

[structuredfinancier]

Each of KIFM and CSIM believe the transactions to be DPU accretive4 for existing unitholders of KIT and CIT, respectively. In addition, prior to the completion of the Combination, existing CIT unitholders will receive a one-time distribution of S$30 million. After the completion of the Combination but before the equity fund raising, the Combined Trust will make a one-time S$30 million distribution to its expanded base of unitholders.

To fund the KMC Acquisition and its related expenses, an equity fund raising of up to S$525 million will be undertaken by issuing new units through a combination of placement to institutional and other investors, as well as a preferential offering to existing unitholders. The offering price, as well as further details of the equity fund raising, will be determined subsequently.

Keppel and Temasek intend to subscribe for their pro-rata entitlements under the preferential offering and do not intend to dispose of their units in the Combined Trust from the date of completion of the Combination to a date no earlier than 12 months following the completion of the equity fund raising exercise.

---

Can someone tell me why issue out dividends then later ask for money back via preferential offering or equity placement?

To make it attractive to say yes to merger. Asking money back has a purpose to buy asset. So attractive as rights issue always priced low.

[weijian]

This arrangement is very clearly a takeover of CIT by KIT, with the combined entity to be named KIT, while KI/KIFM will be sponsor/trustee-manager.

Nonetheless, the story is (1) CIT to accquire KIT by issuing XXX new units, (2) Combined entity will change name to KIT --> I just wonder, is there any reason for the difference in how the story is told vs how things actually are (takeover of CIT) ?

Lower yield fund acquiring a higher yield fund sounds more normal since it is an accretive acquisition.
KIT shareholders will be fuming if KIT is acquiring CIT and results in a drop in yield.

Although in actual fact, KIT is in the driver seat.

The current price is 54cts and CIT shareholders will get one-off distribution of 0.0303 cts in all. So, currently, the investors are paying 51cts for 3.67cts dividend. The yield is 7.2%. Not too bad for an infra fund.

On paper, it is a one-off accretive and related party transaction.

Going forward, it will be important to see if it can continue to do so and if there are sufficient pipeline from sponsors. Sponsors may include Sembcorp Ind since SCI is more active with infrastructure as its core.

Having said all that, on a global basis most of the lucrative non-toll road infrastructure projects have gone the Private Equity route ever since Macquarie Bank has delisted its highly reputed infrastructure vehicles post GFC.

CS appears to be a vehicle of yester-bubble when infrastructure trusts were the fad at the peak of last bullrun.

GG

hi yeokiwi,
It makes sense, thanks...Good to continue to observe along the sidelines and learn all these tricks that the Big Boys are playing on us poor retail meat..

hi GG,
MIIF is also winding up and it seems like CIT is following the cue. That said, infrastructure assets are still excellent assets to hold for the long term, especially for those that exists in highly regulated (and enforced) regimes and provided that they are relatively politically insensitive.

[Stephen]

This arrangement is very clearly a takeover of CIT by KIT, with the combined entity to be named KIT, while KI/KIFM will be sponsor/trustee-manager.

Nonetheless, the story is (1) CIT to accquire KIT by issuing XXX new units, (2) Combined entity will change name to KIT --> I just wonder, is there any reason for the difference in how the story is told vs how things actually are (takeover of CIT) ?

Lower yield fund acquiring a higher yield fund sounds more normal since it is an accretive acquisition.
KIT shareholders will be fuming if KIT is acquiring CIT and results in a drop in yield.

Although in actual fact, KIT is in the driver seat.

The current price is 54cts and CIT shareholders will get one-off distribution of 0.0303 cts in all. So, currently, the investors are paying 51cts for 3.67cts dividend. The yield is 7.2%. Not too bad for an infra fund.

On paper, it is a one-off accretive and related party transaction.

Going forward, it will be important to see if it can continue to do so and if there are sufficient pipeline from sponsors. Sponsors may include Sembcorp Ind since SCI is more active with infrastructure as its core.

Having said all that, on a global basis most of the lucrative non-toll road infrastructure projects have gone the Private Equity route ever since Macquarie Bank has delisted its highly reputed infrastructure vehicles post GFC.

CS appears to be a vehicle of yester-bubble when infrastructure trusts were the fad at the peak of last bullrun.

GG

hi yeokiwi,
It makes sense, thanks...Good to continue to observe along the sidelines and learn all these tricks that the Big Boys are playing on us poor retail meat..

hi GG,
MIIF is also winding up and it seems like CIT is following the cue. That said, infrastructure assets are still excellent assets to hold for the long term, especially for those that exists in highly regulated (and enforced) regimes and provided that they are relatively politically insensitive.

I think this question has been raised before somewhere or in another forum, sorry if i ask again.

What will happen when the life of an asset that Cityspring holds has been totally depreciated?

Whats the difference between accounting and real life in this case?

[Stephen]

This arrangement is very clearly a takeover of CIT by KIT, with the combined entity to be named KIT, while KI/KIFM will be sponsor/trustee-manager.

Nonetheless, the story is (1) CIT to accquire KIT by issuing XXX new units, (2) Combined entity will change name to KIT --> I just wonder, is there any reason for the difference in how the story is told vs how things actually are (takeover of CIT) ?

Lower yield fund acquiring a higher yield fund sounds more normal since it is an accretive acquisition.
KIT shareholders will be fuming if KIT is acquiring CIT and results in a drop in yield.

Although in actual fact, KIT is in the driver seat.

The current price is 54cts and CIT shareholders will get one-off distribution of 0.0303 cts in all. So, currently, the investors are paying 51cts for 3.67cts dividend. The yield is 7.2%. Not too bad for an infra fund.

On paper, it is a one-off accretive and related party transaction.

Going forward, it will be important to see if it can continue to do so and if there are sufficient pipeline from sponsors. Sponsors may include Sembcorp Ind since SCI is more active with infrastructure as its core.

Having said all that, on a global basis most of the lucrative non-toll road infrastructure projects have gone the Private Equity route ever since Macquarie Bank has delisted its highly reputed infrastructure vehicles post GFC.

CS appears to be a vehicle of yester-bubble when infrastructure trusts were the fad at the peak of last bullrun.

GG

hi yeokiwi,
It makes sense, thanks...Good to continue to observe along the sidelines and learn all these tricks that the Big Boys are playing on us poor retail meat..

hi GG,
MIIF is also winding up and it seems like CIT is following the cue. That said, infrastructure assets are still excellent assets to hold for the long term, especially for those that exists in highly regulated (and enforced) regimes and provided that they are relatively politically insensitive.

I think this question has been raised before somewhere or in another forum, sorry if i ask again.

What will happen when the life of an asset that Cityspring holds has been totally depreciated?

Whats the difference between accounting and real life in this case?

I remember attending Cityspring sometime back and their CEO keep highlighting that we should not put much weightage on it profitablity as Depreciation is an accounting concept and non-cash in nature.

So once Cityspring assets gets fully depreciated, its profitability would sky rocket and become a darling to the unawares....hopeful thinking

Vested Cityspring and KIT


Fully Depreciated Assets
It's common to see depreciation referred to as "the decline in an asset's value due to wear and tear." This description may help people wrap their heads around the concept, but it isn't actually correct. Depreciation is about allocating the cost of an asset, not putting a value on it. The book value is just an accounting device (a trick, even); it's not the same as the market value. The truck mentioned earlier may have a book value of $45,000 after one year, but if the company chose to sell it, it might get only $35,000. After nine years, the book value might be $5,000, but maybe the company could get $10,000 for it. A fully depreciated asset may have a book value of zero or a salvage value of, say, $1,000, but the company might get more if it sold the asset

[Nick]

Lower yield fund acquiring a higher yield fund sounds more normal since it is an accretive acquisition.
KIT shareholders will be fuming if KIT is acquiring CIT and results in a drop in yield.

Although in actual fact, KIT is in the driver seat.

The current price is 54cts and CIT shareholders will get one-off distribution of 0.0303 cts in all. So, currently, the investors are paying 51cts for 3.67cts dividend. The yield is 7.2%. Not too bad for an infra fund.

On paper, it is a one-off accretive and related party transaction.

Going forward, it will be important to see if it can continue to do so and if there are sufficient pipeline from sponsors. Sponsors may include Sembcorp Ind since SCI is more active with infrastructure as its core.

Having said all that, on a global basis most of the lucrative non-toll road infrastructure projects have gone the Private Equity route ever since Macquarie Bank has delisted its highly reputed infrastructure vehicles post GFC.

CS appears to be a vehicle of yester-bubble when infrastructure trusts were the fad at the peak of last bullrun.

GG

hi yeokiwi,
It makes sense, thanks...Good to continue to observe along the sidelines and learn all these tricks that the Big Boys are playing on us poor retail meat..

hi GG,
MIIF is also winding up and it seems like CIT is following the cue. That said, infrastructure assets are still excellent assets to hold for the long term, especially for those that exists in highly regulated (and enforced) regimes and provided that they are relatively politically insensitive.

I think this question has been raised before somewhere or in another forum, sorry if i ask again.

What will happen when the life of an asset that Cityspring holds has been totally depreciated?

Whats the difference between accounting and real life in this case?

I remember attending Cityspring sometime back and their CEO keep highlighting that we should not put much weightage on it profitablity as Depreciation is an accounting concept and non-cash in nature.

So once Cityspring assets gets fully depreciated, its profitability would sky rocket and become a darling to the unawares....hopeful thinking

Vested Cityspring and KIT


Fully Depreciated Assets
It's common to see depreciation referred to as "the decline in an asset's value due to wear and tear." This description may help people wrap their heads around the concept, but it isn't actually correct. Depreciation is about allocating the cost of an asset, not putting a value on it. The book value is just an accounting device (a trick, even); it's not the same as the market value. The truck mentioned earlier may have a book value of $45,000 after one year, but if the company chose to sell it, it might get only $35,000. After nine years, the book value might be $5,000, but maybe the company could get $10,000 for it. A fully depreciated asset may have a book value of zero or a salvage value of, say, $1,000, but the company might get more if it sold the asset

The issue will be the underlying land lease / BOT tenure.

[weijian]

I remember attending Cityspring sometime back and their CEO keep highlighting that we should not put much weightage on it profitablity as Depreciation is an accounting concept and non-cash in nature.

So once Cityspring assets gets fully depreciated, its profitability would sky rocket and become a darling to the unawares....hopeful thinking

Vested Cityspring and KIT

For infrastructure assets, I personally don't believe that Mgt (that are non-owners) are incentivised to practise conservative accounting by choosing a higher depreciation rate over the practical one that tracks operating capex or land/license tenure more accurately. It is in their benefit to have the appropriate depreciation policy that maximises their remmuneration when it is KPI calculation time. In the long run, they may not have the luxury to stay and see their conservative accounting reap benefits for them...

For example, in china, dividends can only be paid out of net profits. For their asset HNE (hua nan expressway), the brillant financiers in MIIF tried to change the depreciation policy from time-based to traffic-based...The latter would allow them to free up more cash to pay shareholders (and themselves) now. They most probably hope to recycle the asset down the road and leave the buyer to hold the baby, or milk the future remmuneration of whoever is going to manage the asset (if they continue to hold it)