CitySpring’s FY09 revenue of S$398.7m was within expectations. The trust will distribute 1.75 cts per unit for 4Q09, representing a yoy growth of 9.4% and no change from 3Q09. Total DPU of 7 cts declared for FY09 was in line with the manager’s guidance. The target DPU for FY10F remains to be 7 cts, implying an attractive forward trading yield of 12.6%.

4Q09 revenue was up 1.5% yoy to S$97.3m and cash earnings increased 7.3% yoy to $21.8m. The better than expected full year cash earnings of $60.9m were mainly attributable to the higher average gross margin at CityGas due to the tariff changes during the year. Lower revenue and cash earnings are expected in 1QFY10 after the tariff reduction in Feb-09.

The current slowdown in the Singapore economy is expected to impact CityGas negatively in FY10F, but the effect should be muted due to its large and diversified customer base and even exposure to the residential and commercial segments. SingSpring and Basslink, with long-term availability-based contracts with state-owned entities, will continue to deliver stable revenues.

The trust wrote off S$10.8m in intangibles in 4Q09 due to the termination of the telecoms agreement with the Tasmanian government in Apr-09. This paved the way for the commercialization of Basslink’s fibre optic cables, which was over-due. A number of customers have signed up and the network is expected to be operational by the middle of this year.

CitySpring is committed to deliver a DPU of 7 cts for FY10F. Cash accumulated so far is sufficient to cover a quarterly DPU of 1.75 cts in the next 12 months. Our target price has been raised from $0.84 to reflect the normalization of the equity risk premium. DPU for 4Q09 is payable on 26th June. Maintain Buy.