HUTCHISON PORT HOLDINGS TRUST (SGX:NS8U)
Hutchison Port Holdings Trust - Recent Selldown; Unchanged Fair Value
- Hutchison Port Holdings Trust’s share price down 9.6% since our downgrade.
- Trade talks are ongoing.
- Upgrade to HOLD as at 22 Feb’s close.
Underperformed STI by 7.7 ppt since our downgrade
- Since our downgrade to Sell, Hutchison Port Holdings Trust’s share price has declined 9.6% till 22 Feb’s closing. Including dividends, Hutchison Port Holdings Trust (SGX:NS8U) posted a total return of -5.6%, which is 7.7 ppt below the STI’s total return for that period.
- Recall that we downgraded Hutchison Port Holdings Trust on 13 Feb (see report: Hutchison Port Holdings Trust - HK$12.3b Non-Cash Impairment) on the back of
- the large goodwill write-down,
- the low DPU guidance of 11 to 17 HK cents for FY19, and
- diminishing prospects of an early termination of the voluntary debt program.
- At 22 Feb’s closing price, as FY18’s large non-cash impairment has reduced NAV per unit to HK$3.07 or ~US$0.39, Hutchison Port Holdings Trust is trading at a historical P/B of 0.6x which is not attractive relative to peers.
- Our forecasted dividend yield for FY19F is 7.1% as at 22 Feb’s close.
Trade deal in the works?
- Trade negotiations between China and the US are ongoing with a deal looking increasingly likely. President Trump announced on Sunday that he will delay the tariffs that were scheduled to begin on 1 March, citing “substantial progress” in trade talks.
- Going forward, while a trade deal would
- boost investor sentiment for port stocks like Hutchison Port Holdings Trust, and
- help to reduce the probability (or the extent) of a decline in throughput volumes for US in the near-term,
- there still remains other structural challenges for Hutchison Port Holdings Trust, especially for its Kwai Tsing ports.
- Under our coverage, we prefer COSCO SHIPPING Ports (1199 HK) as well as China Merchants Port Holdings.
- Our fair value remains at US$0.22. Given the recent Hutchison Port Holdings Trust’s share price decline, we upgrade Hutchison Port Holdings Trust from Sell to HOLD.
Deborah Ong
OCBC Investment Research
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https://www.iocbc.com/
2019-02-25
SGX Stock
Analyst Report
0.220
SAME
0.220
