Thursday, October 3, 2013

Hutchison Port Holdings Trust: Refinancing an important boost

Hutchison Port Holdings Trust:
Fair value US$0.84
add: 12m dividend forecast US$0.06
versus: Current price US$0.79

Refinancing an important boost
• 9% price increase following initiation
• Interest rate cost of new debt at ~1.5%
• Raise FV to US$0.84

According to Dow Jones, Hutchison Port Holdings Trust (HPHT) has secured a US$3.6b refinancing loan which comprises three tranches – a US$1b one-year loan, a US$1.6b three-year loan and a US$1b five-year loan. The one-year tranche is at an interest rate of 0.6% above Libor, while the three-year and five-year tranches are 1.1% and 1.4% above Libor respectively.
On a blended basis, we estimate that the interest rate cost for this loan is ~1.5%, dramatically lower than the 2.5% rate which management had previously guided. Updating our model to reflect the lower future interest expense, we raise our DDM-based FV to US$0.84 from US$0.76 and maintain a BUY rating on HPHT. We estimate that HPHT is currently trading at an attractive FY14F dividend yield of 7.9%.

Unit price up 9% since initiation
Since we initiated on Hutchison Port Holdings Trust (HPHT) on 4 Sep, HPHT’s unit price has climbed 9.0% to US$0.790 from US$0.725. We believe the increase is chiefly due to: 1) the Fed’s decision to delay tapering its bond purchases, which has given a general boost to the equity markets, and 2) positive economic data points from both Europe and the US. The service industries in the US expanded in August in the fastest pace in close to eight years (Institute for Supply Management's non-manufacturing index, 6 Sep). Markit's flash Eurozone PMI for Sep was a 27-month high (released 23 Sep).

Maintaining 2013 topline forecast
We are currently maintaining our forecasts of 0% and 2% YoY growth in 2013 throughput for HPHT’s ports in Kwai Tsing, HK (including the increase in TEU from the acquisition of Asia Container Terminals in Mar) and Yantian, Shenzhen respectively. Aug container throughput at Kwai Tsing was 1.478m TEU, down 1.7% MoM and up 1.5% YoY, while Aug container throughput at Yantian was 2.093m TEU, up 0.9% MoM and up 1.1% YoY. We believe that if the US and European economies continue to strengthen, there is potential for better volumes in 2014.

Cheap refinancing
According to Dow Jones, HPHT has secured a US$3.6b refinancing loan which comprises three tranches – a US$1b one-year loan, a US$1.6b three-year loan and a US$1b five-year loan. The one-year tranche is at an interest rate of 0.6% above Libor, while the three-year and five-year tranches are 1.1% and 1.4% above Libor respectively. On a blended basis, we estimate that the interest rate cost for this loan is ~1.5%, dramatically lower than the 2.5% rate which management had previously guided.

Maintain BUY
Updating our model to reflect the lower future interest expense, we raise our DDM-based FV to US$0.84 from US$0.76 and maintain a BUY rating on HPHT. We estimate that HPHT is currently trading at an attractive FY14F dividend yield of 7.9%.



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 30/09/13

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