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 Listed in February 2007, CitySpring Infrastructure Trust was set up by Temasek as one of its key investment platforms focused on infrastructure, and first such trust to have been listed on the Singapore Stock Exchange.
Mainboard listed CitySpring aims to be a leading player in what it believes to be a growing sector, and to provide its unitholders with regular, predictable distributions. In fact, it looks set to deliver this into the medium to long-term future, through its portfolio of utilities-focused businesses.
Geographically, about 51% of its assets come from Singapore where CitySpring's portfolio comprises gas distribution through its 100% ownership of City Gas Trust, sole producer and retailer of town gas in Singapore to some 600,000 customers in residential, commercial and industrial sectors.
CitySpring's local portfolio is also made up of the water business through its 70%-ownership of SingSpring Trust – the sole supplier of desalinated water to the Singapore Public Utilities Board, the country's national water agency.
About 49% of its business comes from overseas, namely Australia at this point, from electricity transmission through fibre optic cables via wholly owned Basslink, acquired in November 2007. Basslink is the 'strategic' interconnector between the electricity grids that connect mainland Australia and the state of Tasmania. Basslink is also the alternative telecommunication link provider to incumbent Telstra.
Steady growth from core businesses
 Chief Executive of CitySpring Infrastructure Management – the trustee-manager, Mr Fai Au Yeung is optimistic about continued business growth as the global economic situation improves.
Speaking of its gas business, he said that being a resilient business, in the last 12 months, even though there was a recession, City Gas did not see such a meaningful drop in the residential sector.
"Cooking is an essential need even in such times" said Mr Au Yeung, adding that City Gas has seen steady volumes over the last year and is now experiencing volume growth with economic recovery on its way.
In this area, the company hopes to continue to tap into the property boom and continual growth in Singapore, to grow its market share versus liquid petroleum gas (LPG).
Said Mr Au Yeung, "We compete with LPG bottled gas suppliers, and electricity for cooking and heating purposes". He estimates that of the current 1.1 million residential homes on the island, there are about 700,000 already connected to pipelines, but "as (Singapore's) housing stock renews, there should be more and more connected to town gas pipelines".
Growth of City Gas' customer base is expected primarily from the older Housing Board Development in the 70s and 80s, many of which are undergoing upgrades and re-construction, new HDB flats currently being built and in the future, as well as from the private condominium sector, of which about 95-100% are typically connected at time of construction.
Said Mr Au Yeung, "Our strategy is to make sure we get more connections and move up the value chain to provide more heating sources beyond the traditional (that is, cooking)…and we are working with property developers to get the pipelines up and running for the kitchen, bathrooms, laundry areas to cookers, water heaters and clothes dryers for town gas. We are offering three-in-one packages to capture more volume from new customers".
Other avenues for growth within the Singapore market include the hotel and hospitality sector where the company works on getting connections up and running to customers there, with more structured and customized solutions tailored for fuel-efficient water heating. With the integrated resort coming up, this bodes well for City Gas.
 CitySpring is also looking at Singapore's large country footprint of shopping malls as a growing sector with large F&B premises – all of which require town gas access. With so many new malls coming up and on the roadmap, Mr Au Yeung believes this will stand the gas business in good stead. Of gas tariff adjustments, Mr Au Yeung said these would have minimal impact on City Gas’ long-term growth.
SingSpring's water desalination plant continues to provide steady growth through its long-term paid on availability contract with the PUB which lasts 20 years from Dec 2006, and operates on 100% availability, and is expected to continue to continue healthy earnings to the group.
In the area of telecoms, investors can look forward to further and steady growth in the near future from Basslink Telecom services as the network has been commissioned earlier last year in July 2009, and has started carrying customers' broadband traffic.
It is expected to add incrementally to the bottomline as more customers – namely Internet Service Providers, corporate and telecom operators – sign on, and should benefit from the Australian Government's ambitious National Broadband Network investments. Tasmania will be the first state to implement this initiative and is fast-tracking the rollout of its fibre-to-the-premises network.
Said Mr Au Yeung: "We were profitable from day one. The main thing now is to get other players to come into the Tasmanian market, as rates were high previously. With our entry into the market, it is hoped that we can help increase the overall pie in Tasmania."
Acquisitions
Moving forward, opportunities to grow the business lie further afield in the rest of the immediate Asia Pacific region and even farther. Mr Au Yeung counts among his key markets, China & the Middle East.
"We are long-term in our business outlook, and we do not believe in exiting our current businesses. We continue to focus on expanding organic growth, to obtain better operations of our existing base of assets, and are constantly on the lookout for better growth opportunities, such as through acquisitions," he said.
The company will continue looking at all types of infrastructure-related businesses, including utilities, transportation and logistics, as well as communications assets, admittedly belonging to the traditional classes of acquisitions, with the strategy of not paying top dollar but to take its time to evaluate money-making and value-for-investment assets.
Said Mr Au Yeung: "We are looking for operational assets, especially those who can already contribute immediately, and which on standalone basis can already produce returns higher than they cost…and we want to buy assets on our own terms".
Financial updates
So far, the company has raised about S$400.5 million in its 2007 initial public offer, and a further S$235.2 million just in the third quarter of 2009 through a rights issue, to reduce debt, enhance financial flexibility and to fund further growth plans.
Mr Au Yeung also pointed to its dividend history, which has shown increases every year, as an indication of the fact the company has actually delivered on its promises to shareholders.
The group recently announced results of 2QFY2010 & 1HFY2010 ended September 2009, which were in line with expectations, and said its business fundamentals for all main businesses remained strong, meeting all their operational targets, save City Gas’ sales volumes which have grown year-on-year despite the weaker Singapore economy in the first six months of this calendar year.
Overall, cash earnings were supported by steady contributions from all three assets, and amounted to S$9.6 million. This compared year-on-year to the S$1.1 million it posted due to one-off items & tariff timing.
CitySpring reported 2QFY10 (ending Sep 2009) revenue of S$92.3mn (+10.3% quarter-on quarter; -12.4% year-on-year). Cash earnings of S$9.6 million was higher year-on-year due to one-off expenses incurred in 2QFY09 but lower on a sequential basis due largely to mismatch of gas tariffs and fuel costs. The company also said that SingSpring Trust added S$4.7 million cash earnings to the fold while Basslink Telecom contributed A$4.8 million in the quarter.
For the quarter, the company also declared a distribution per unit (DPU) of S$1.05 cents, 5% higher than the pro forma DPU indicated in the rights issue.
Mr Au Yeung was also pleased to report that the 1-for-1 rights issue concluded in September enjoyed strong support from existing institutional and retail investors and said that investor base has grown from 17,000 to 21,000 for CitySpring in the company statement.
Analyst reports show positive sentiments for the stock on the whole.
Most expect CitySpring further building on its existing portfolio and to grow its telecom business and like its stable businesses. For example, OCBC believes CitySpring will likely be able to deliver gradual but modest organic growth in distributions in the long term, driven by increasing City Gas volumes and the fledgling telecoms business at Basslink, while significant income increases are expected to be fueled by external growth.
For more information about the company: http://www.cityspring.com.sg/
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