Hutchison Port Holdings Trust
LAST CLOSE: US$0.735
FAIR VALUE: US$0.820
Maintain Buy on Aracve Yield
DPU below expectations. In H113, Hutchison Port Holdings Trust (HPHT) reported a 0.9% y-o-y decline in overall revenue and a 11% y-o-y fall in net profit. By stripping out the one-time acquisition and performance fees, this translates into a 7.3% y-o-y decline in net profit, on normalised terms. HPHT announced its half-yearly dividend of HKD18.7cents, which was 7.8% lower than our forecast.
A mixed bag. There was a mixed showing between HPHT’s Yantian and Hong Kong ports. HIT reported a 13.9% decline in its throughput volumes, and this could be attributed to the unfavourable factors of an absence of transhipment flows and the labour strike impact. Specifically, FY2012 witnessed the formation of new liner alliances, which underpinned strong transhipment flows in that year. Yantian, on the other hand, performed comparatively better, with container throughput up 2.3% on the back of stronger growth in transhipment cargoes.
Flattish throughput outlook in Hong Kong. Despite the labour strike impact on HPHT’s Hong Kong throughput volumes, we believe this will be offset by additional throughput contribution from its newly-acquired Asia Container Terminals in Hong Kong. We are currently projecting flattish growth in HPHT’s overall Hong Kong throughput volumes in FY2013.
Yantian’s fortunes brighter. With the euro zone continuing to muddle along as well as early encouraging signs of a sustained economic recovery in the US, we are cautiously optimistic about Yantian’s near-term throughput outlook. Unemployment rate in the euro zone continues to head higher and the region’s industrial production remained firmly in negative territory, suggesting that the euro zone is not out of the woods yet. In the US, the dynamics of improving consumer sentiment, manufacturing growth, housing data and an increasing US inventory-to-sales ratio provide room for optimism in US trade flows going forward. Taking these into account, we project a 4% throughput growth at Yantian in FY2013.
Maintain BUY on FV US$0.82. We adjusted our fair value lower to US$0.82 on the assumption of a higher risk-free rate (2.4% vs 1.4% previously) and lower projected DPU (HKD40.3cents vs HKD45cents previously). Our fair value implies a potential upside of 11.6%. HPHT also offers a projected FY2013 dividend yield of 7.1% and a forward FY2014 yield of 7.7%. Given the attractiveness of HPHT as a high-yielding play, particularly when compared with REITs and business trusts, we maintain our BUY rating on the stock.
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Publish date: 31/07/13