Keppel Infrastructure Trust: Two Rights Issues Don’t Make A Wrong?
In what seems to be a sure-win situation for me, I was offered the right to apply for new shares in Keppel Infrastructure Trust, formerly CitySpring Infrastructure Trust when they merged with the “old” (previous) Keppel Infrastructure Trust. I have vested in this counter since 2013, as I wasn’t too positive on it previously, and also because it wasn’t on it on my radar – in fact, I only went in after the news came out that OpenNet was going to be sold to NetLink Trust back then, which was managed by CityNet, a subsidiary of CitySpring Infrastructure Trust.
I’m sure some financial bloggers which used to have a stake in this business trust (or covered it) have the nitty-gritty details of it’s past rights issues in 2011 and 2013, and to be honest, it’s not pretty, as their corporate movements since it’s inital listing on the SGX in 2007 have been quite disappointing – a massive deal to buy Basslink (an Australian infrastructure asset) saddled it with a heavy debt since 2011, and pretty much their shares had been languishing below 50 cents since 2013, and below 40 cents in 2012.
However, as a growing business trust, that is not the end of the story. It seems that hard work by the management, and with the big push for infrastructure development by the government, CitySpring was back in the black in the later half of 2014, and with the blessings of Temasek Holdings, Keppel Infrastructure Trust merged with CitySpring Infrastructure Trust this year not long ago. Now with a more balanced portfolio of assets, it seems that the combined trust is in a better position to handle the ups and downs of the market better, and hopefully, no more biting off more than what it can chew on.
So how do I make of this? Well for a start, if you choose to vest in a company that you trust in, and believe it will grow over the long term, then you should stick to it through thick and thin. Of course, this goes without saying that good corporate governance is key to a turnaround. In this case, it took about 8 years for the IPO investors to finally see the light at the end of the tunnel (89 cents!), assuming they did take up the rights issue over the past 8 years to average down on their holdings. Woe to those that did not, though, as they are stuck. From my perspective as a retail investor, it also strengthened my belief that one shouldn’t put too much money down on an IPO just for it to go underwater a few years (and in some cases, days or weeks) later, even though it is possible to “stag” it for a quick turnaround – that’s not really my forte, so I won’t cover that.
The question now is what would KIT now do with its assets, and how would it stack up against other infrastructure plays on the SGX, like Cache Logistics Trust, or Keppel Telecommunications and Transportation? I think I’ll leave that to the best storyteller known to man – time.