Price (25 Jul 13, US$) 0.76
TP (prev. TP US$) 0.72 (0.72)
2Q13 ... another down quarter
● Hutchison Port Holdings Trust (HPHT) reports its 2Q13 profits after market close on 30 July, with a call timed for 1830 SIN time. We expect pre-ex NPAT of HK$390 mn, down 34% on last year and 6% below consensus of HK$416 mn.
● Earnings typically build in 2Q towards the 3Q summer peak; however, the impact of the dockworkers strike, slower PRC export volumes and changes in shipping patterns are expected to have combined negatively with the pernicious effect of higher wages to keep NPAT at around 1Q13's levels.
● Key focus will be on distributions and the read-through to full-year from the company's recommendation for 1H13. Assuming that capex is split as it was last year, we expect a distribution of HK$0.18/unit to be consistent with a full-year payout of HK$0.41.
● HPHT remains modestly above our US$0.72 target price, which is based on a target yield of 7.5% that we think is comparable to other SGX-listed business trusts with similar risk profiles. Our UNDERPERFORM rating is unchanged.
Margin pressure continues
Only the purchase of ACT’s 1 mn-odd TEUs a year in extra throughput that concluded at the end of 1Q is expected to have offset the decline in volumes that HPHT will have experienced in the quarter just gone. Hong Kong’s main container docks saw a 6% drop in volumes, although this is expected to have been concentrated on CT4,6,7 and 9 … those run by HPHT. COSCO-HIT (HPHT’s JV with COSCO Pacific) saw a more modest thoughput erosion (just below flat), although the previously solid growth rates at Yantian in Shenzhen also reversed during 2Q13 … even with the transfer of traffic that otherwise would have gone to HKG on account of the port strike.
While we project a 1% total rise in 2Q volumes, risk lies on the downside given 1Q13’s 4.8% decline at Kwai Tsing was exceeded by HIT’s estimated 7% drop. It is also possible that the shift of transhipment cargo to Yantian during the Hong Kong disruptions will have impacted mix and unit revenues at that port.
We have long highlighted labour costs as an issue for Asian port operators, with this proving the catalyst to the work stoppages in Hong Kong. We expect these to rise around 10% in 2Q13 in both China and Hong Kong and—as the largest component of operating costs—will contribute to the >5% decline in operating margin that we project for 2Q.
Risk to earnings lies on the downside in our view and with this comes risk to distributions. Management has already guided expectation towards the bottom of the HK$0.44-0.41 range—and it could go lower.
Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date: 29/07/13