HPH Trust - OCBC Investment 2016-06-14: Poor April Throughput Figures

Hutchison Port Holdings Trust - OCBC Investment 2016-06-14: Poor April Throughput Figures HPH TRUST HUTCHISON PORT HOLDINGS TRUST NS8U.SI 

HPH Trust - Poor April Throughput Figures

  • Kwai Tsing throughput down 11% YTD
  • Growth in market share
  • Lowered FV; maintain HOLD

Adjusting throughput assumptions on poor Apr figures

  • Year-to-date, Hong Kong Port Container Throughput (Kwai Tsing Terminals) has fallen 11.1% while China Shenzhen Container Throughput has dipped 0.6%. 
  • For April alone, HK container throughput was down 9.0% while Shenzhen’s was up 3.7%. 
  • Given the continued rationalization as well as the muted PMI indicators for US and Eurozone, we find it less likely that there will be a strong enough recovery in HPHT’s HK throughput in 2H to end the year flat, as suggested by the management. 
  • We adjust our projections for throughput growth accordingly, lowering our forecast for HPHT’s HK terminals from -4.0% YoY to -6.0% YoY, and YICT’s from 4.0% to 3.0%. 
  • However, given the further declines projected for this fiscal year, we remain optimistic on throughput growth prospects in FY17 from 2016’s low base: 4.0% YoY for YICT and 5.0% YoY for HK ports respectively.

Consistent industry outperformer

  • We note that HPHT has generally outperformed industry throughput growth in the past five years for both HK and Shenzhen, with either higher growth or more muted declines. 
  • HPHT’s market share of Shenzhen throughput has increased from 45.5% in 2011 to 50.5% in 2015, while that for Kwai Tsing has grown from 66.9% to 75.5% respectively.

FY17 DPU hit by debt restructuring

  • As announced in 1Q16, HPHT seeks to lower its Consolidated Gross Debt to EBITDA ratio to 4x, as opposed to its previous 5x guideline. This necessitates repayment of a minimum of HK$1bn of debt annually beginning in 2017 for five years. 
  • The management has the option to use the HK$357m refund received in 1Q16 to offset part of this additional finance cost, either across five years or in FY17 alone. For our model, we have assumed it will be spread out over five years. 
  • Our FY16 DPU forecast drops from 31 HK cents to 28 HK cents while our FY17 forecast dips from 32 to 28 HK cents. 
  • We maintain HOLD as our fair value estimate drops from US$0.46 to US$0.41.

Deborah Ong OCBC Securities | http://www.ocbcresearch.com/ 2016-06-14
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.41 Down 0.46