CGS International
Report Date: July 30, 2025

Keppel Infrastructure Trust Delivers Stable Growth: 2025 Outlook, Peer Comparison, and ESG Momentum

Introduction: Strong First Half Results and Positive Outlook

Keppel Infrastructure Trust (KIT), a leading player in Singapore’s energy infrastructure landscape, reported a robust performance for 1H25, with a distributable income of S\$119.4 million, marking a 31.2% year-on-year increase. Excluding one-off divestment gains, distributable income remained stable, down just 0.7% year-on-year. KIT’s 1H25 DPU of 1.97 Singapore cents was up 1% year-on-year and on track, representing 50.4% of the full-year forecast. The trust’s operations remained steady across most of its portfolio, with the notable exception of windfarm assets affected by unusual weather patterns. KIT’s balance sheet strengthened with a reduced gearing ratio of 39.3% at the end of 2Q25, offering significant “dry powder” for future growth opportunities. The FY25-27 DPU forecasts have been raised by 1%, and the target price has increased to S\$0.47.

Portfolio Performance: Steady Operations and Growth Drivers

KIT’s diverse portfolio continued to drive value, with several evergreen businesses gaining momentum:

• City Energy: Achieved a 43% year-on-year increase in distributions, driven by rising town gas demand and higher service income. The launch of the Life brand of smart gas water heaters contributed to a doubling in average monthly water heater sales.
• Ixom: Saw a 59% year-on-year jump, benefitting from robust growth in its bitumen segment and continued strength in chemical manufacturing and distribution across Australia and New Zealand.
• Ventura: 1H25 marked the first full half-year contribution from the entire Ventura stake, further boosting earnings stability.

Windfarms and Other Assets: Awaiting Tailwinds

• Offshore Windfarm Portfolio: Contributions were nearly absent in 1H25 due to unusually low wind speeds in the North Sea. This underperformance was a direct result of abnormal weather conditions.
• EMK (Landfill Operations): Market rates for landfills remained weak, limiting EMK’s ability to deploy capacity effectively.
• Waste Oil Refiner and Incineration Businesses: These segments continued to show quarter-on-quarter improvements despite external challenges.
• Aramco, KMC, and Concession Businesses: The full-year impact from debt refinancing, restructuring, and lease renewal in FY24 weighed on contributions. The German solar portfolio also saw lower year-on-year returns due to one-off asset sales in 1H24.

Strategic Moves: Divestments and Future Acquisitions

• Year-to-date, KIT unlocked S\$301 million in divestment proceeds from the sale of its 24.62% Ventura stake and its entire stake in Philippine Coastal.
• In 1Q25, KIT proposed acquiring a 46.7% interest in Global Marine Group, a subsea cable service provider. Pending unitholder approval, this acquisition is expected to provide immediate distributable income accretion, likely in 4Q25.
• KIT anticipates a small asset dropdown from its UK onshore windfarm portfolio, targeted for completion in 2H25.

Key re-rating catalysts include favorable weather conditions and accretive acquisitions, while downside risks encompass policy changes, unexpected weather events, and safety hazards in industrial assets.

Financial Metrics: Revenue, Profitability, and Cash Flow

Below is a summary of KIT’s key financial metrics and projections:

Key changes from this update include a 1% increase in FY25F-27F DPU, and a 7-10% boost in FY25-27F EPS from fair value gains, divestment proceeds, and reduced borrowings—partially offset by lower windfarm contributions.

Peer Comparison: Infrastructure Companies at a Glance

KIT stands out among its Singapore and global peers for its attractive dividend yield and stable business model.

Singapore business trusts, on average, show a 7.5% dividend yield, with KIT’s 9.0% standing out. KIT’s P/BV and ROE are competitive, and its diversified asset base provides income stability compared to many peers.

ESG Leadership: Commitment to Sustainability and Safety

KIT demonstrates a strong commitment to sustainability and governance:

• MSCI ESG rating of A in 2024, with zero incidents of non-compliance, corruption, or data breaches.
• Targeting net zero Scope 1 and 2 greenhouse gas emissions by 2025 and 2GW of renewables by 2030.
• Integrated climate scenario analysis into investment and risk frameworks.
• Significant workforce investment, exceeding 23 hours of training per employee, and community engagement with over 1,100 volunteer hours.

A fatal subcontractor incident in 2023 led to an elevated Lost Time Injury Severity Rate (LTISR), raising safety concerns. However, KIT has since shown a positive downward trend in total recordable incidents and Lost Time Injury Frequency Rate (LTIFR), underscoring improved safety oversight.
KIT’s 76% increase in renewable energy capacity in 2024 marks a decisive shift toward energy transition and long-term sustainability. This progress enhances KIT’s standing with ESG-conscious investors and facilitates access to green financing.

Balance Sheet and Cash Flow: Robust Financial Position

KIT’s financial foundation remains solid, supporting its growth ambitions:

• Total Cash and Equivalents (2025F): S\$369 million
• Total Assets (2025F): S\$6,038 million
• Net Gearing (2025F): 148%
• Free Cash Flow to Equity (2025F): -S\$2.4 million (expected to rise to S\$283.2 million by 2027F)
• Operating EBITDA Margin: Projected stable at ~22.3% through 2027F

Key ratios indicate prudent capital management, with gross interest cover improving and a consistently high net dividend payout ratio (365%+ through 2027F).

Shareholder Base and Analyst Coverage

Major shareholders include:

• Keppel Ltd: 16.8%
• Bartley Investments: 6.8%
• Tembusu Capital: 4.1%

The stock is currently rated “Add” by the covering analysts, with a target price of S\$0.47 and an attractive 9.0% forward yield.

Conclusion: KIT’s Investment Case Remains Strong

KIT’s diversified portfolio, stable recurring income, and proactive capital recycling reinforce its appeal to yield-focused investors. With a strong pipeline of potential acquisitions, a disciplined approach to gearing, and a clear ESG commitment, KIT is well-positioned to deliver sustainable returns. The trust’s performance in 1H25 and its strategic initiatives underpin a compelling outlook for the remainder of 2025 and beyond.
Keen market watchers and investors should keep KIT on their radar for its combination of income stability, growth potential, and sustainability credentials in the evolving infrastructure investment landscape.