Hutchison Port Holdings Trust - OCBC Investment 2017-11-22: Calmer Seas Ahead?

Hutchison Port Holdings Trust - OCBC Investment 2017-11-22: Calmer Seas Ahead? HUTCHISON PORT HOLDINGS TRUST NS8U.SI

Hutchison Port Holdings Trust - Calmer Seas Ahead?

  • Collect at US$0.39 and below.
  • FV remains at US$0.42.
  • Maintain HOLD.

6.1% to 7.0% DPU yield based on management guidance 

  • Hutchison Port Holdings Trust’s (HPHT) unit price has moderated downwards slightly from US$0.435 since our last report to our fair value of US$0.420 as of yesterday. 
  • Recall that management still keeps to its FY17 DPU guidance of 20 to 23 HK cents, and am more comfortable with the lower end of that range. This translates to 6.1% to 7.0% FY17 dividend yield.

Not expecting another steep DPU decline in FY18 

  • Looking forward to FY18F, the management expects a much milder decline in ASP and low single-digit throughput growth in Kwai Tsing and YICT. YICT in particular is expected to enjoy steady throughput growth for the US and Europe shipping routes. 
  • According to the IMF World Economic Outlook (Oct 2017), US and EU GDP are forecasted to grow +2.3% and +2.1% in FY18, respectively. With much of the impact from the new shipping alliances already expressed this year through ASP weakness, we do see it as probable that HPHT will not see another round of such steep DPU declines next year, relative to what has been seen in years to date. 
  • HPHT’s DPU was 34.4 HK cents in FY15 (10.5% yield against US$0.420), 30.6 HK cents in FY16 (9.3% yield), and we forecast it to reach 21.0 HK cents in FY17F (6.4% yield) and 22.5 HK cents in FY18F (6.9% yield). 
  • Bloomberg consensus DPU forecasts stand at 20.6 HK cents for FY17F and 21.3 HK cents for FY18F .

Collect units at US$0.39 and below 

  • We do not find current unit prices particularly attractive, and see a much clearer value proposition at US$0.39 and below. 
  • Those tracking industry data may be concerned with the 0.9% YoY decline recorded in industry-wide HK Kwai Tsing container throughput for Oct. We believe this figure is skewed by the data from Modern Terminals Limited, and keep the positive throughput growth assumption we have for HPHT’s HK ports in FY17. For 10M17, HK Kwai Tsing container throughput remains up by +8.9% YoY. 
  • Maintain HOLD with an unchanged fair value of US$0.42.

Deborah Ong OCBC Investment | 2017-11-22
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.420 Same 0.420