Hutchison Port Holdings Trust - OCBC Investment 2016-02-03: Respectable FY15 results in tough conditions

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HUTCHISON PORT HOLDINGS TRUST NS8U.SI 

Hutchison Port Holdings Trust: Respectable FY15 results in tough conditions 

 Core earnings above expectations 

 Resilient throughput volumes in FY15 

 Core DPU expected to stay flat 

Earnings in line with expectations 

• FY15 core NPAT attributable to unitholders came in at HK$1,609.9m, up mostly due to cost management improvements. 
• In terms of the topline, FY15 revenue was down 0.1% YoY to HK$12,612.8m, supported by tariff increases during the year. 
• We are expecting the trust’s performance to weaken for 1H16 as EU cargo trends make a slow recovery and shipping line alliances result in resource rationalization. 
• Management expects distribution per unit for FY16 to fall between 30 and 32 HK cents. 

Throughput weakness at HK terminals continues 

• Overall FY15 container throughput remained flat, decreasing 1.4% YoY. 
• Combined throughput at Hong Kong International Terminals (HIT), COSCO-HIT Terminals (CHT), and Asia Container Terminals (ACT) decreased 6.4% YoY to 11.8m TEU. 
• Relative to the 11.5% throughput decline in the Hong Kong Kwai Tsing terminals, HPHT’s assets outperformed due to its suitability for mega-vessel deployment. 
• Throughput volumes at the Yantian International Container Terminals (YICT) remained resilient, increasing 4.2% YoY to 12.2m TEU. 
• The addition of mega-vessels to fleets, use of vessel-sharing schemes, and formation of shipping alliances are expected to put a drag on HK throughput volumes in 1H16 as port usage is rationalized. 

Ongoing weakness in a volatile environment 

• According to the management, outbound cargoes to Europe are giving indications of a mild recovery but the ongoing yuan devaluation has prompted Chinese exporters to put orders on hold until the situation stabilizes. 
• Given the soft industry conditions, we expect HPHT’s tariff increases for the remaining half of its customers to average 3%. 
• FY16 revenue is forecasted to increase by 1.6% YoY while NPAT attributable to unitholders is expected to drop by 4.6%. 
• Given limited upside over the horizon in terms of revenue growth and margin improvements, our fair value estimate dips from US$0.54 to US$0.46 as we update our valuation model. 
• Our target price and FY16 DPU imply total returns of 6.5%. 
• Maintain HOLD. 

Deborah Ong OCBC Securities | http://www.ocbcresearch.com/ 2016-02-03

OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.46 Down 0.54