Hutchison Port Holdings Trust - DBS Research 2021-09-29: Higher Dividends Within Reach

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HUTCHISON PORT HOLDINGS TRUST (SGX:NS8U)

Hutchison Port Holdings Trust - Higher Dividends Within Reach

• Further 19% recovery in August throughput volumes at Yantian after 70% increase in July.
• YTD volume growth still above expectations at 9.0% for Yantian and 3.4% for Kwai Tsing.
• China’s PMI: New Export Orders fell for the fifth consecutive month to 46.7 in August.

Hutchison Port Holdings Trust - Investment Thesis

Recommend BUY with higher target price of US$0.33 on the back of strong throughput growth and resilient earnings.

• With year-to-date volumes at both Yantian (+9.0% y-o-y) and Kwai Tsing (+3.4% y-o-y) ports above our expectations, we raise our FY21F throughput growth assumptions from 3% to 4% for Yantian and 1% to 2% for Kwai Tsing. We also lift our FY21F/FY22F earnings forecast for Hutchison Port Holdings Trust (SGX:NS8U) by 33%/10% as 1H21 earnings outperformed significantly. We continue to like Hutchison Port Holdings Trust as we believe that earnings have bottomed and investors can look forward to a sustained period of recovery.

FY21F dividend payout highest level in three years, with more room to grow in the medium term.

• Hutchison Port Holdings Trust's FY21F DPU guidance stood at the high end of 11-13 HKcts, with the potential to be higher at ~14 HKcts if earnings remain firm. An interim dividend of HK6.5cts for 1H21 was declared on the back of robust 1H21 results, which is more than a 50% y-o-y increase from 1H20. We believe that higher dividends in the medium term are also on the cards, powered by high operating leverage and lower finance costs

Undemanding valuations; good time to BUY.

• Hutchison Port Holdings Trust is currently trading at 0.6x P/BV, which is ~ 0.5 standard deviation above its five-year mean, against an ROE of 4.3%. It is an attractive yield play, with the highest FY21F dividend yield of 8.2% among the three port companies under our coverage.

Hutchison Port Holdings Trust - Valuation:

• Maintain BUY and higher target price of US$0.33 for Hutchison Port Holdings Trust. Our discounted cash flow (DCF)-based target target price assumes weighted average cost of capital (WACC) of 8.0% (cost of capital 10.0%).
• See
  • Hutchison Port Holdings Trust's Share Price,
  • Hutchison Port Holdings Trust's Target Price,
  • Hutchison Port Holdings Trust's Analyst Reports,
  • Hutchison Port Holdings Trust's Dividend History,
  • Hutchison Port Holdings Trust's Announcements,
  • Hutchison Port Holdings Trust's Latest News.

Where we differ:

• Our FY21F forecasts are lower than consensus. We remain conservative, leaving upside risk to our throughput volume forecasts for FY21F.

Key Risks to Our View:

• A global recession would materially impact trade and throughput numbers for Hutchison Port Holdings Trust, which would then have an impact on the Trust’s earnings, cash flows and dividends.

Paul YONG CFA DBS Group Research | https://www.dbsvickers.com/ 2021-09-29

SGX Stock Analyst Report BUY MAINTAIN BUY 0.33 UP 0.320