Hutchison Port Holdings Trust - OCBC Investment 2019-10-30: Still Challenges Ahead

HUTCHISON PORT HOLDINGS TRUST (SGX:NS8U) | SGinvestors.io HUTCHISON PORT HOLDINGS TRUST (SGX:NS8U)

Hutchison Port Holdings Trust - Still Challenges Ahead

  • Cargo volumes under pressure.
  • Relatively stable ASP.
  • Expecting weak 4Q.



Investment thesis

  • HUTCHISON PORT HOLDINGS TRUST (SGX:NS8U)’s 3QFY19 revenue and other income was flat (+0.1% y-o-y) at HK$3.0b. PATMI in 3QFY19 declined by 2.9% y-o-y to HK$232.5b mainly due to higher taxation, partly offset by lower financing cost following the recent rate cuts. See Hutchison Port Holdings Trust Announcements.
  • The results came in above our expectations due to lower-than-expected revenue declines which were in turn attributed to seasonality impact and our overly bearish throughput projections.
  • Management maintained their DPU guidance of 11 -17 HK cents for FY19 but expects weaker volume growth in 4QFY19 due to declining US cargoes and high base effect from exporters’ frontloading activities ahead of tariff implementation in 2018.


Not as bad as expected

  • Hutchison Port Holdings Trust’s 3QFY19 revenue and other income was flat (+0.1% y-o-y) at HK$3.0b. Operating profit increased by 1.9% y-o-y to HK$1.1b due to cost savings. PATMI in 3QFY19 declined by 2.9% y-o-y to HK$232.5b mainly due higher taxation, partly offset by lower financing cost following the recent rate cuts.
  • The results came in above our expectations due to lower-than-expected revenue declines which were in turn attributed to seasonality impact and our overly bearish throughput projections.


Weak US cargoes volumes

  • For 3QFY19, the combined container throughput of Hutchison Port Holdings Trust Kwai Tsing was flat y-o-y while the container throughput of YICT decreased by 0.9% y-o-y, dragged by weak US cargoes volumes, but partially offset by the increase in empty cargoes.
  • YTD September 2019, Hutchison Port Holdings Trust’s throughout was 1% down y-o-y. YICT’s throughput grew by 3% y-o-y while Kwai Tsing declined by 5% y-o-y. Stripping off the impact of RMB depreciations, ASP was relatively stable in 3Q and expected to remain stable in 4Q.
  • US-China trade tensions continue to weigh on Hutchison Port Holdings Trust’s performances, with US cargoes down 8% y-o-y in 3Q but helped by growth in outbound cargoes to the Europe (up 6% y-o-y).


Lower DPU FY19 forecast

  • Management maintained their DPU guidance of 11 -17 HK cents for FY19 but expects weaker volume growth in 4QFY19 due to declining US cargoes and high base effect from exporters’ frontloading activities ahead of tariff implementation in 2018. See Hutchison Port Holdings Trust Dividend History.
  • Recall that YICT’s volume was up 10% in 4QFY18. As such, we revised our FY19 DPU down from 13 HK cents to 12 HK cents.
  • Given that the stock remains a proxy to US-China trade tensions, we continue to expect high volatility with ongoing news flow on the trade situation. After adjustments, our fair value decreases from US$0.17 to S$0.155. See Hutchison Port Holdings Trust Share Price; Hutchison Port Holdings Trust Target Price.





Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2019-10-30
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.155 DOWN 0.220



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