Hutchison Port Holdings Trust - Positive throughput growth in Kwai Tsing
- Results within expectations.
- FY17 yield of 7.1%.
- Maintain HOLD.
1Q17 results were in line with expectations
- Hutchison Port Holdings Trust’s (HPHT) 1Q17 results were in line with expectations.
- 1Q17 revenue dropped 6.3% YoY to HK$2,578.0m, or 22.0% of our forecast. Note that 1Q revenue made up ~23% of full-year revenue in both FY15 and FY16.
- Operating profit dropped 38.5% YoY to HK$709.0m, or 20% of our forecast. Stripping out last year’s government rent and rates refund of HK$430.0m, operating profit was flat.
- Similarly, excluding the rates refund, NPAT attributable to unitholders dropped 15.7% YoY to HK$166.9m or 13.3% of our full-year forecast. 1Q15 NPAT made up 15% of FY15 NPAT, while 1Q16 NPAT (without the rates refund) made up 16% of FY16 NPAT.
- With the HK$1b debt repayment expected to take place sometime next month, we expect interest costs for the trust to decrease in 2H17, and consequently for 2H17 NPAT to contribute a slightly larger percentage of full-year NPAT.
HPHT Kwai Tsing throughput up 3% YoY
- YICT throughput dropped 1% YoY while combined throughput of HIT, COSCO-HIT and ACT (collectively “HPHT Kwai Tsing”) increased 3% YoY; this was in line with our projection of a 2% decline in YICT and a 4% gain for the HK ports in FY17.
- We expect the trend seen in 1Q to continue for the rest of the year, with growing outbound cargoes to the US and EU albeit lower empties/transshipment for YICT and stronger transshipment cargoes for HPHT Kwai Tsing terminals.
- Tariff rate pressure was seen at HPHT Kwai Tsing which saw a 4% drop in ASP, mainly due to negotiations with members in alliances. YICT ASP dropped 3% mainly due to RMB depreciation.
- The management has reiterated their guidance of 20-23 HK cents for FY17F DPU.
- While we have kept our forecasts largely intact, we have decided to lower our terminal growth rate from 1.0% to 0.5% as we have moderated our forward expectations. As a result, our fair value drops from US$0.45 to US$0.42.
- We do note, however, that there is potential upside should HPHT be able to command higher tariff rates for the mega-vessel berths in YICT.
- HPHT is trading at a FY17 yield of 7.1%. Maintain HOLD with a fair value estimate of US$0.42.