Hutchison Port Holdings Trust - OCBC Investment 2017-07-20: Throughput Growth Offset By ASP Pressure

Hutchison Port Holdings Trust - OCBC Investment 2017-07-20: Throughput Growth Offset By ASP Pressure HUTCHISON PORT HOLDINGS TRUST NS8U.SI

Hutchison Port Holdings Trust - Throughput Growth Offset By ASP Pressure

  • 2Q results within expectations.
  • 32% drop in 1H17 DPU.
  • Trading at 6.0% FY17F yield.

2Q results within expectations 

  • Hutchison Port Holdings Trust (HPHT)'s 2Q17 revenue dropped 1.5% YoY to HK$2,894.3m, or 24.9% of our forecast. 
  • Note that 2Q revenue made up ~25% of full-year revenue in both FY15 and FY16. 
  • NPAT attributable to unitholders dropped 21.5% YoY to HK$269.1m or 22.6% of our full-year forecast. 
  • 1H17 DPU dropped 32.1% YoY to 9.5 S cents, or 42.2% of our full-year forecast, which we consider within expectations. As a comparison, 1H15 and 1H16 DPU each made up around 46% of their respective full-year DPU.

Throughput growth offset by pricing pressures 

  • HPHT’s 4% increase in its HK throughput in 2Q17 was in line with our full-year forecast of a 4% gain, as the ports enjoyed stronger transshipment cargoes. ASP for HPHT’s HK ports dropped 7% YoY in 2Q17, affected by negotiations with alliance members as well as special concessions awarded. 
  • Meanwhile, YICT’s 2Q strong throughput gain of 10% pleasantly beat our expectations of a 2% decline for the whole year, boosted by temporary phasing-in- phasing-out business supported by a healthy growth in outbound cargoes to the US and EU. 
  • Nonetheless, YICT’s throughput growth was offset by a larger than expected 5% in its ASP following discussions with merger members. 
  • For 2H17, HPHT’s YICT and HK throughput growth are expected to come in at the 4-6% range while ASP for each are forecasted to dip 5%.

Unchanged fair value; time of take profit 

  • After making our adjustments, our fair value remains at US$0.42. 
  • The management still keeps to its FY17 DPU guidance of 20 to 23 HK cents which translates to a range of 5.3% to 6.1% dividend yield against yesterday’s price. Our own DPU forecast of 22.5 HK cents translates into 6.0% FY17F yield or 1.6x s.d. below its average yield since listing. 
  • We continue to believe that HPHT’s deep water assets will offer it a comparative advantage in the coming years when streamlining measures by the alliances exert pressure on transshipment volumes. Nonetheless, the trust is currently trading 14.2% above our fair value. 
  • Given the recent HPHT's unit price appreciation, we encourage investors to take profit and downgrade HPHT from a Hold to a SELL at an unchanged fair value of S$0.42.

Deborah Ong OCBC Investment | http://www.ocbcresearch.com/ 2017-07-20
OCBC Investment SGX Stock Analyst Report SELL Downgrade HOLD 0.420 Same 0.420