Special dividend bonanza for unitholders
- Special distribution of 2.33 Scts in 3Q23 catches us by surprise; base distribution of 0.97 Scts for 3Q23 in line
- Special distribution is driven by successful value creation at key assets like Ixom and CityEnergy
- Business model remains largely recession proof and inflation proof; credit metrics healthy
- Recent share price weakness overdone in our view; maintain BUY with TP of S$0.57
Special distribution in 3Q23 a positive surprise. KIT departed from recent tradition (semi-annual reporting and distributions) under new CEO Kevin Neo (replacing Jopy Chiang, who has moved on to a different role in the Keppel group) and not only reported 3Q results and steady 3Q23 distributions (0.97Scts), but also took us by surprise by announcing a special dividend of 2.33Scts for the quarter to reward longtime unitholders.
Total 3Q23 DPU (ex-date: 9 Nov 23 and pay date: 20 Nov 23) would thus be around 3.30Scts (handy 7.5% yield for just one quarter) and 9M23 DPU will be around 5.23Scts, implying full-year FY23 DPU of around 6.20Scts or a 14% dividend yield at current prices. This compares to 3.82Scts DPU last year in FY22, which was slightly above the stable baseline DPU of 3.72Scts that KIT had paid out on a legacy basis from FY15-20. FY23 distributions will thus represent a blowout year for unitholders who have patiently stayed with KIT.