Hutchison Port Holdings Trust - OCBC Investment 2016-07-29: Results Within Expectation

Hutchison Port Holdings Trust - OCBC Investment 2016-07-29: Results Within Expectation HUTCHISON PORT HOLDINGS TRUST NS8U.SI 

Hutchison Port Holdings Trust - RESULTS WITHIN EXPECTATIONS

  • NPAT attributable to unitholders drops 14.3% YoY.
  • YTD throughput fell 7.1%.
  • FY16/17 yield of 7.8%.

Results in line with expectations

  • HPHT’s results were within our expectations. 
  • 2Q16 core NPAT attributable to unitholders decreased 14.3% YoY to HK$342.7m, making up 24.8% of our full-year forecast. 
  • 2Q16 revenue dropped 6.1% YoY to HK$2.9b on lower throughput, though this was mitigated by a 0.8% YoY increase in tariff rates. 
  • Cost efficiency savings were highlighted by the management, with a 10.4% YoY reduction in cost of services rendered for 2Q16.

Adjust FY16 and FY17 throughput assumptions

  • 1H16 throughput for HPHT fell 7.1% YoY. HIT’s throughput was affected by weaker intra-Asia and transshipment cargoes, while YICT’s throughput was adversely impacted by the decrease in transshipment despite the increase in imports to US and Europe. 
  • We adjust our assumptions for FY16 throughput YoY growth for HK ports (from -6% to -8%) and YICT (from 3% to 0%) based on 2Q16 results. 
  • We expect the YoY % drop for 2H16 to be less than that for 1H16, seeing that the decline in throughput started in 2H15 (-2.1% YoY in 3Q15; -6.3% YoY in 4Q15). 
  • Looking forward, we expect the industry to remain depressed in FY17 and our forecasted throughput growth for FY17 drops from +4.5% to -0.8% YoY.

Maintain HOLD

  • DPU for 1H16 came in at 14.00 HK cents. 
  • We note that management reiterated their FY16 DPU guidance of 30 to 32 HK cents, while backing away from their earlier guidance of flat throughput for the year. The management has clarified that distributable income will not be supplemented by the government refund in 1Q16. 
  • For FY13, FY14, and FY15, 1H contributed ~46% of full-year DPU. Seeing that 1H16 DPU contributed 50% to our full-year forecast, we increase our FY16 DPU to 30.50 HK cents (99.9% payout). 
  • FY17 DPU is forecasted to come in at 27.90 HK cents (99.9% payout) following the revised throughput assumptions. 
  • We decrease our risk-free rate from 3.0% to 2.4%, and following the changes mentioned above, our fair value increases from US$0.43 to US$0.46. 
  • Against yesterday’s closing price of US$0.485, HPHT is trading at a blended FY16/17 yield of 7.8%. 
  • Maintain HOLD with a fair value estimate of US$0.46.

Deborah Ong OCBC Securities | 2016-07-29
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.46 Up 0.43