Hutchison Port Holdings Trust - OCBC Investment 2019-04-29: Not For Sale


Hutchison Port Holdings Trust - Not For Sale

Results within expectations

  • HUTCHISON PORT HOLDINGS TRUST (SGX:NS8U)’s 1Q19 results were within expectations. Revenue increased 0.3% to HK$2.7b while operating profit increased 0.8% y-o-y to HK$769.2m.
  • However, due to higher interest costs (which increased HK$45.4m y-o-y to HK$274.4m) and higher tax, PATMI dropped by HK$48.5m or 33.4% y-o-y to HK$96.9m – making up 25% of our full-year forecast.

Throughput down 2% y-o-y for the quarter

  • Hutchison Port Holdings Trust’s throughput for 1Q19 was down 2%. In particular, YICT’s throughput was up 5% due to a 14% growth in empties as well as growth in transshipment cargoes.
  • Outbound cargoes to the US declined 5% y-o-y, slightly less severe than what was expected by management given the front-loading of orders in 4Q18. Meanwhile those to the EU grew 1% y-o-y.
  • On the other hand, Kwai Tsing throughput was down 10%, due to the decrease in transshipment cargoes as well as a high base effect as throughput in 1Q18 was boosted by one-off activity from the Japanese alliance consolidation.
  • In terms of ASPs, Yantian ASP was down 3% mainly due to the depreciation of RMB by 5%; half of Yantian revenue is in RMB. Kwai Tsing ASP increased 8% due to the mix of the type of service – an increase in barge vessel cargoes as opposed to vessel-to-vessel cargoes. As a whole, management noted that the base rate for both Yantian and Kwai Tsing remain stable.

Typo in Bloomberg report! Hutchison Port Holdings Trust is not for sale

  • Separately, we note that there was a typo in a Bloomberg report on Friday afternoon wrongly suggesting that Hutchison Port Holdings Trust was for sale. Hutchison Port Holdings Trust is *not* for sale; the Bloomberg article has been corrected.
  • Since our upgrade from Sell to HOLD on 25 Feb (see report: Hutchison Port Holdings Trust - Recent Selldown; Unchanged Fair Value), Hutchison Port Holdings Trust has posted total returns of +2.1%, versus the Straits Times Index’s +3.1%.
  • Management is keeping to its DPU guidance of 11 HK cents to 17 HK cents for FY19F. Our FY19F DPU forecast remains at 13 HK cents which translates into a dividend yield of 6.9% as at 26 Apr’s closing price. Going forward, we keep watch on global economic growth figures, ongoing discussions regarding the trade war, and possible cost-saving synergies from the Hong Kong Seaport Alliance.
  • We maintain HOLD on Hutchison Port Holdings Trust with an unchanged fair value of US$0.22.

Deborah Ong OCBC Investment Research | 2019-04-29
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.220 SAME 0.220