OCBC Investment Research 2015-07-23: Hutchison Port Holdings Trust: Decent growth but below expectations. Maintain HOLD.

Hutchison Port Holdings Trust: Decent growth but below expectations 

 Cautious on outlook for volume 
 EU growth weaker than anticipated 
 Lower FV from US$0.68 to US$0.63 

Decent growth but below expectations 2Q15 

  • PATMI came in at HK$399.9m, up 8.5% YoY mostly due to good cost-side management and the positive impact of tariff increases, partially offset by higher taxes. 
  • In terms of the topline, 2Q15 revenues increased 2.1% YoY to HK$3,127.9m. 
  • While the quarter’s results showed respectable YoY growth, it came in below consensus and our expectations, with 1H15 PATMI constituting 39.7% of our full year forecast. That said, we are expecting the trust’s performance to strengthen in 2H15 as positive US cargo trends continue and the impact of tariff increases kicks in further. 
  • An interim distribution per unit for 1H15 of 15.7 HK cents was proposed. 
  • TEU uplifts from tariff increases 2Q15 container throughput at HIT (Hong Kong International Terminals) decreased 2.5% YoY, mostly due to weaker intra-Asia and transshipment cargoes, while throughput at YICT (Yantian International Container Terminals) increased 4.0% YoY as growth in the US strengthened and more empty cargoes were handled. 
  • Average TEU in Hong Kong increased 5.5% YoY given tariff increases and improved throughput mix from liners; similarly, average TEU for China increased 0.7% YoY due to tariff increments. 

Management cautious about volume growth in 2H15 

  • Management struck a relatively cautious tone regarding their outlook for volume growth for 2H15 given the weak EU market and will continue their focus on controlling costs and tariff improvements. 
  • While the outbound cargoes to the US continued to show an upward trend, the decline in the EU space has been more severe than anticipated. 
  • Given the weaker than expected results this quarter, our fair value estimate dips to US$0.63 from US$0.68 previously as we update our valuation model. 
  • Maintain HOLD. 

(Eli Lee)

Source: http://www.ocbcresearch.com/