HUTCHISON PORT HOLDINGS TRUST
NS8U.SI
Hutchison Port Holdings Trust - Keeping Our Assumptions
- Recent spike in trading interest.
- Tariff rate pressure.
- FY17 yield of 6.5%.
Drewry and Alphaliner have raised forecasts
- Hutchison Port Holdings Trust (HPHT) saw a spike in trading volumes and unit prices late last week.
- HPHT's unit price rallied 5.9% last Thu alone, from US$0.425 to US$0.45, before moderating to US$0.445 on Fri. Last week’s trading volume stands at 161.5m units, as compared to an average of 50.1m units/week in the prior ten weeks.
- In terms of potential reasons for this trading interest, we note that industry watchers such as Drewry and Alphaliner have recently raised their forecasts for global throughput growth from a 2%-3% range to 4%-4.6%.
Maintaining our throughput assumptions
- According to port statistics, Hong Kong Kwai Tsing container throughput increased +14.3% YoY in May 2017, and +12.5% YoY for the JanMay 2017 period. On the other hand, Shenzhen container throughput increased +5.9% YoY in May and +0.8% YoY for the Jan-May 2017 period.
- We believe that a part of the recent strength may be due to temporary adjustments as the newly formed alliances phase in their new vessels before subsequently phasing out their old vessels.
- In addition, overall HK Kwai Tsing growth rates may not be representative of HPHT’s throughput growth, with Modern Terminals exhibiting higher YoY growth as it makes up for a throughput drop in 2015.
- Recall that in 1Q17, HPHT’s HK throughput increased 3% YoY, even though a 12.5% YoY growth was reported for Kwai Tsing container terminals as a whole.
- For now, we maintain our expectation of a 4% gain for its HK throughput and a 2% decline for HPHT’s YICT throughput for FY17.
Pricing pressures still intact in the short term
- There is limited visibility on tariff rates as compared to throughput trends and we expect further pricing pressure for HPHT given renegotiations with the new alliances.
- Recall that in 1Q17, HPHT HK ports saw a 4% YoY drop in ASP, mainly due to these renegotiations. YICT ASP had also dropped 3% YoY, though mainly due to RMB depreciation.
- Against last Friday’s closing price, HPHT is trading at a FY17 yield of 6.5%.
- We maintain HOLD with a fair value estimate of US$0.42, and see a better entry point below US$0.40.
Deborah Ong
OCBC Investment
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http://www.ocbcresearch.com/
2017-06-19
OCBC Investment
SGX Stock
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0.420
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0.420
