Hutchison Port Holdings Trust -
STI : 3,195.76
Price Target : 12-Month US$ 0.82
Sequential earnings improve
■ 3Q earnings fell 8% y-o-y to HK$539m, but improved 28% q-o-q as HIT operations are now back on track
■ Signs of some improvement in US bound trade but cargo traffic to Europe remains tepid
■ On track for DPU of 40HKcts for the full year
■ Maintain BUY and US$0.82 TP
Revenue climbed 1% y-o-y in 3Q to HK$3,364m, despite a 12% decrease in throughput at HIT and a 3.5% drop at Yantian Port, as HPHT raised effective tariff rates and a substantial part of the decline was from transshipment and/or empty boxes.
… but overall costs rose faster at 1.3%, which was largely driven by higher wage costs, as reflected in higher direct staff costs (+5.5%) and cost of services rendered (+3%).
Net earnings fell more as Yantian outperformed HK. With Yantian Port registering better earnings due to lower taxes and higher other income, and HK operations struggling with a drop in volumes and higher costs, minority interests rose 7% and profit attributable to shareholders fell 8% y-o-y for the quarter.
Guidance for 40HKcts DPU in 2013. HPHT earlier in the year had targeted FY13 DPU of between 40HKcts to 44HKcts. Given the industrial action that transpired in the first half and a lackluster 3Q, the Trust is now guiding for overall DPU of 40HKcts for the full year, or 21.3HKcts for 2H13.
HK to lead recovery in 2014. With the industrial action now well behind it and a full year’s contribution from ACT, we expect HIT to post a significant improvement in 2014, which should lead to an overall earnings improvement for HPHT. At the same time, we expect overall throughput numbers to show a mild improvement next year.
Prospective yield of 7.7% for FY14 is attractive; maintain BUY. We maintain our view that the worst is over for HPHT. In addition to improving HK operations and a mild uptick in throughput volumes, the recent signing of a US$3.6bn term loan facility to refinance its loans at an attractive rate will also provide further room for earnings to improve next year. Hence, we project HPHT’s DPU to improve from 5.3UScts to 5.9UScts in FY14.
Publish date: 22/10/13