Keppel Infrastructure Trust: An overlooked dividend play

Research evidence excerpt

Keppel Infrastructure Trust: An overlooked dividend play

Keppel Infrastructure Trust UBS Research

UBS Research THESIS MAP Thesisa guideMapto our thinking and what´s where in this report

Pivotal Questions Q: Do expiring service concessions pose a risk to KIT's Distributable Income (DI) growth?

No. The Trust has done well to offset declining FFO from expiring concessions through acquisition of

evergreen assets, which have a perpetual earnings profile (Figure 3KIThasacquiredweltoofsetdecliningFOfromexpiringconcesions and Figure 5DespiteexpiringSingaporewasteandwaterconcesions,KIThasmanagedtogrowitsFOthroughacquisitions). KIT's evergreen

assets tend to have dominant market positions, with embedded cost pass through mechanisms

(Figure 7ImpactofMidleEastconflictonKIT'severgrenbusineses,andcostrecoverymechanisms). This allows the Trust to achieve DI growth in excess of concession-based income, while

mitigating potential downside risks from higher input costs.

Q: Does KIT have to conduct equity fund raising (EFR) in order to grow dividends?

No. The Trust in recent years has been more proactive in capital recycling, using proceeds raised from

divestments of Philippines Coastal and Ventura (25% stake) to fund recent acquisitions, in addition to

its pending 39% acquisition of KMC in 2026. The Trust also has capacity to gear up further to fund

DI and DPU growth - its net gearing levels currently stand at 42% against bank covenants of 55%.

UBS VIEW We have a Buy rating on KIT. KIT offers investors exposure to essential infrastructure assets that are

backed by long-term service concessions, or have market leading positions with cost pass through

mechanisms. KIT has acquired well to offset declining earnings associated with expiring service