WRITTEN BY DOW JONES & CO, INC
WEDNESDAY, 17 APRIL 2013 17:03
The labour disruptions at HPHT’s Hong Kong port are spurring concerns over the impact on labour flexibility and likely wage-rate pressure, Citigroup says, noting wage rates could be pressured upward by 10% this year on an annual basis, above the 5% the house originally considered.
“More important, we believe that the notable flexibility that HIT enjoys regarding its current subcontractor labor structure (pertaining to roughly two-thirds of its operational staff) could also be in jeopardy, particularly in the current volume environment and what we believe to be structural longer-term headwinds for export growth out of South China/HK.” It cuts its target to US$0.71 ($0.91) from US$0.74 to reflect the selloff in Cosco Pacific and China Merchants, resulting in lower peer P/E multiples of 14.4X and 9X respectively, compared with HPHT’s 23.8X. It keeps a Sell call.
“While we do appreciate the relatively higher dividend/distribution yield, uninspiring fundamentals (and now a labor disruption) will weigh on the name.” The stock is down 3.6% at US$0.81.
Publish date: 17/04/13