Wednesday, October 23, 2013

Hutchison Ports Holdings Trust - Uncertainty Prevails (RHB)

Hutchison Ports Holdings Trust -
Target Price: USD0.79
Uncertainty Prevails

Hutchison Ports Trust (HPHT)’s  9MFY13  earnings were in  line with  our expectations. Management remains cautious on the company’s outlook for  2014.  Boosting  yields  remains  priority  in  the  current  challenging times, with the impending P3 alliance giving rise to more concerns. We maintain NEUTRAL on the stock, with an unchanged USD0.79 FV, as the stock’s 7.5% yield for FY14 still looks attractive.


- Results  in  line.  HPHT’s 9MFY13 earnings were below consensus but broadly in line with our expectations, accounting for 73% of our full-year forecast,  with  revenue  comprising  74%  of  our  estimate.  As  such,  we make no changes to our forecasts. 3QFY13 earnings slipped 8.4% y-o-y, dragging  its  cumulative  core  earnings  13%  lower  YTD.  The  y-o-y earnings drop was attributed to a combination of slower throughput  and higher  staff  costs  following  a  union  strike  in  1QFY13.  Q-o-q  earnings came in seasonally stronger due to peak season demand.

- Container  throughput  still  languishing.  Container  volume  was  down 1.8%  y-o-y  in  3QFY13  and  2%  in  9MFY13.  The  weaker  3QFY13  was due to typhoons and a volume drop at Yantian Port, but HIT (Hong Kong International  Terminal)  managed  to  cushion  the  impact  with  flat  y-o-y volume.  While  trade  to/from  the  US  and  Europe  picked  up  in  3Q,  this was  merely  the  result  of  a  single-digit  increase  in  laden  container volume, which was more than offset by a larger decline in empty cargo, possibly due to liners’ efforts to minimize inefficiencies.

- Caution  prevails.  Management  remains  cautious  on  a  strong  recovery in  throughout  volume.  Instead  of  chasing  volume,  HPHT’s  primary objective is to boost container yield given the need to pass on its higher staff  costs.  Meanwhile,  the impending  P3 shipping  alliance –  which has yet to receive regulatory approval – is giving rise to more uncertainty as well as a risk that transshipments could drop further next year. With HIT seeing  a  strong  pickup  next  year,  we  expect  overall  throughput  to  grow by  6%  and  4%  respectively  for  2014  and  2015  (2013:  +1%).  There  is scope  for  earnings  downside  should  throughput  fall  below  expectations in the months ahead.

- Maintain  NEUTRAL  at  an  unchanged  DCF-based  FV  of  USD0.79.  At the current price, the stock’s yield remains a decent 7.5% for FY14.


Source/Extract/Excerpts/来源/转贴/摘录: RHB-Research,
Publish date: 22/10/13

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