4Q09 revenue came in line with our expectations, at S$97.3m. While revenue from City Gas declined 17% q-o-q on the back of lower tariffs, receipts from SingSpring were 58% stronger q-o-q as the plant operated at 100% utilization for 26 days in February.

Cash earnings for the period were, however, better than expected at S$21.8m – boosted by higher margins at City Gas, which continued to benefit from lower fuel costs. Total cash earnings for FY09 amounted to S$60.2m, of which about S$34.3m will be paid out as dividends, representing a payout ratio of 57%. Among extraordinary items for 4Q09, CitySpring wrote down S$11m in goodwill arising from the termination of the Telecoms Agreement (“TA”) between Basslink and the Tasmania Government.

Being availability-based, SingSpring and Basslink should provide steady cash flows while City Gas earnings may be lower in FY10 – lower tariffs will lead to lower margins while the economic downturn may reduce industrial consumption of gas. However, the Trust management is confident of maintaining DPU payout at 7 Scts for FY10, backed by about S$96m gross cash on its books.

The termination of the TA agreement paves the way for Basslink to commercialize its fibre optic cables, which is expected to be operational by mid’09. This should add an additional revenue stream to Basslink, flowing down directly to the bottomline. However, impact may not be very significant in FY10. Elsewhere, management is still not looking for M&A opportunities, preferring to wait and watch for better valuations and cheaper funding. Maintain HOLD, in the absence of any near term catalysts. Our DDM-based TP remains unchanged at S$0.57.