Hutchison Port Holdings Trust - OCBC Investment 2016-04-19: 1Q16 Results Inline With Expectation

Hutchison Port Holdings Trust - OCBC Investment 2016-04-19: 1Q16 Results Inline With Expectation HUTCHISON PORT HOLDINGS TRUST NS8U.SI 

Hutchison Port Holdings Trust - 1Q16 Results Inline With Expectation 

  • Weak fundamentals expected for 1H16 
  • FY16 throughput expected to remain flat 
  • Maintain HOLD 

Results in line with expectations 

  • 1Q16 core NPAT attributable to unitholders fell 27% to HK$210.1m, after stripping away the one-off government refund of HK$430.0m, and the additional depreciation due to a change in accounting estimate in 2015. This comes up to 13% of our full year forecast, which is in line with our expectations for weaker first half results for 2016; for a comparison, 1Q15 NPAT attributable to unitholders contributed 16% of the FY15 figure. 
  • In terms of topline, 1Q16 revenue was down 7% YoY to HK$2,752m due to lower throughput in its HK ports as well as RMB depreciation. This was mitigated by the tariff rate increments in both HIT and YICT. 
  • We note that costs of services rendered dropped more than proportionally, decreasing 10% YoY, helped by lower fuel prices and savings in operation costs. 

HK throughput continues to decline, YICT stable 

  • HIT, COSCO-HIT, and ACT throughput decreased 12% YoY to 2.6m TEU due to weaker inter-Asian and transshipment cargoes. YICT throughput remained flat, decreasing by 1% YoY to 2.7m TEU due to weaker transshipment and empty cargoes, offset by low single-digit growth in the export trade to US and EU. 
  • The management expects outbound cargoes to the US to show a slight increase this year, while Europe export throughput remains flat. 
  • Overall, throughput at HPHT’s HK ports is expected to make a recovery in 2H16, such that HPHT’s FY16 throughput remains flat over FY15. 

Debt restructuring over the next five years 

  • In anticipation of interest rate normalization, HPHT seeks to lower its Consolidated Gross Debt to EBITDA ratio to 4x, as opposed to the 5x guideline set previously. This necessitates repayment of a minimum of HK$1bn of debt annually beginning in 2017, for five years, ~HK$600m above the mandatory amortization currently being paid yearly. 
  • HPHT’s debt restructuring is expected to reduce total consolidated debt from HK$33bn to HK$28bn in 2021. This is expected to reduce interest costs going forward. 
  • For FY16 DPU, the management has left guidance unchanged at 30 to 32 HK cents. 
  • Our FY16 DPU forecast remains at 31 HK cents. 
  • We maintain HOLD with a fair value estimate of US$0.46. 

Deborah Ong OCBC Securities | 2016-04-19
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.46 Same 0.46