Hutchison Port Holdings Trust -
Price (16 Sep 13 , US$) 0.77
TP (prev. TP US$) 0.86 (0.72)
Rating lifted as macro environment improves
● We have lifted our estimates, target price and rating for HutchisonPort Holdings Trust (HPHT) as 1H13's decline in throughput appears to have bottomed out and there are signs that Western consumption is poised to recover.
● We have raised our throughput assumptions for the balance of 2013 and 2014, reflecting better PRC export numbers in August and signs that throughput in Kwai Tsing and COSCO-HIT are recovering: August throughput numbers were uniformly positive for HPHT's Hong Kong terminals, which had previously flagged.
● This has lifted our NPAT estimates from HK$2,231 mn and HK$2,482 mn to HK$2,249 mn and HK$2,553 mn, respectively, now sitting 9% and 20% ahead of consensus in 2013/2014.
● With rising cash flows, we have increased our distribution estimates for both years, along with our rating from Neutral to OUTPERFORM. Our TP increase to US$0.86 is based on a target 2014 yield of 7%, which we believe is appropriate relative to its earnings growth and other SGX-listed yield plays.
Yield…with earnings growth
Our post-results rating upgrade for HPHT at the end of July was based on an expectation that earnings had troughed: renewed PRC export activity and improved numbers ex-Hong Kong in August have emboldened us to lift estimates for throughput at Hong Kong, especially, and have fed through into earnings. Where investors might have sought the company for yield (the attraction of which has become increasingly questionable in an environment of rising interest rates), we now believe earnings growth is as justifiable a reason to engage.
Given the unjustifiable rise in Shanghai International Port Group's stock price, we recommend investors switch into HPHT where valuation is far more attractive.
PRC exports grew 7% YoY in August, reflecting renewed demand from the West, with import box volumes rising in both the US and EU. The read-through to HPHT has also been visible: August volumes at Kwai Tsing terminals in HKG (where its HIT and ACT terminals are located) rose 1.5% YoY (the best performance since September 2012), with its COSCO-HIT joint venture ahead >10% YoY (its best month since March 2012).
Yantian hit a speed bump in August (down >6%), but we expect this to reverse over the balance of the year. For 2013, we now expect throughput at HIT to fall ~1% (vs 2% previously) and to bounce by 7% in 2014. For YICT, we are looking for 2.5% and 9% in 2013 and 2014, respectively, and COSCO-HIT should see flat throughput (vs our earlier 1% drop expectation) and 7.5% growth in 2014.
HPHT's yields top the table of Singapore comparable companies— even when adjusted for its falling distribution growth between 2012 and 2014E, which reflects its capex programme. While still markedly higher than the REITs, we believe it should trade closer to Cityspring at around 7%, which drives our US$0.86/share TP.
Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date: 18/09/13