Hutchison Port Holdings Trust - OCBC Investment 2017-04-25: Positive Throughput Growth in Kwai Tsing

Hutchison Port Holdings Trust - OCBC Investment 2017-04-25: Positive throughput growth in Kwai Tsing HUTCHISON PORT HOLDINGS TRUST NS8U.SI

Hutchison Port Holdings Trust - Positive throughput growth in Kwai Tsing

  • Results within expectations.
  • FY17 yield of 7.1%.
  • Maintain HOLD.

1Q17 results were in line with expectations 

  • Hutchison Port Holdings Trust’s (HPHT) 1Q17 results were in line with expectations. 
  • 1Q17 revenue dropped 6.3% YoY to HK$2,578.0m, or 22.0% of our forecast. Note that 1Q revenue made up ~23% of full-year revenue in both FY15 and FY16. 
  • Operating profit dropped 38.5% YoY to HK$709.0m, or 20% of our forecast. Stripping out last year’s government rent and rates refund of HK$430.0m, operating profit was flat. 
  • Similarly, excluding the rates refund, NPAT attributable to unitholders dropped 15.7% YoY to HK$166.9m or 13.3% of our full-year forecast. 1Q15 NPAT made up 15% of FY15 NPAT, while 1Q16 NPAT (without the rates refund) made up 16% of FY16 NPAT. 
  • With the HK$1b debt repayment expected to take place sometime next month, we expect interest costs for the trust to decrease in 2H17, and consequently for 2H17 NPAT to contribute a slightly larger percentage of full-year NPAT.

HPHT Kwai Tsing throughput up 3% YoY 

  • YICT throughput dropped 1% YoY while combined throughput of HIT, COSCO-HIT and ACT (collectively “HPHT Kwai Tsing”) increased 3% YoY; this was in line with our projection of a 2% decline in YICT and a 4% gain for the HK ports in FY17. 
  • We expect the trend seen in 1Q to continue for the rest of the year, with growing outbound cargoes to the US and EU albeit lower empties/transshipment for YICT and stronger transshipment cargoes for HPHT Kwai Tsing terminals. 
  • Tariff rate pressure was seen at HPHT Kwai Tsing which saw a 4% drop in ASP, mainly due to negotiations with members in alliances. YICT ASP dropped 3% mainly due to RMB depreciation.

Maintain HOLD 

  • The management has reiterated their guidance of 20-23 HK cents for FY17F DPU. 
  • While we have kept our forecasts largely intact, we have decided to lower our terminal growth rate from 1.0% to 0.5% as we have moderated our forward expectations. As a result, our fair value drops from US$0.45 to US$0.42
  • We do note, however, that there is potential upside should HPHT be able to command higher tariff rates for the mega-vessel berths in YICT. 
  • HPHT is trading at a FY17 yield of 7.1%. Maintain HOLD with a fair value estimate of US$0.42.

Deborah Ong OCBC Investment | 2017-04-25
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.420 Down 0.450