HPH Trust's Q1 profit down 15.5%

RISING staff costs and a hike in other operating expenses saw Hutchison Port Holdings Trust (HPH Trust) posting a 15.5 per cent drop in profit attributable to its unit-holders at HK$380.3 million for the first quarter ended March 31, 2013. Revenue and other income for the quarter rose 1.1 per cent to HK$2.87 billion, the trust reported after the market closed on Tuesday. While throughput at the trust's Hong Kong terminals fell 7.4 per cent, its Yantian terminals recorded a 6.3 per cent increase year-on-year. HPH Trust makes its distribution to unit-holders on a semi-annual basis, with the figure calculated as at June 30 and Dec 31 each year.

HPH Trust's Q1 profit down 15.5%

HPH

if the port were to give in to the request for a 20% increase in salary, unit holders of HPH Trust could see DPU reduce some 5 to 7%.

HPH Trust: Deutsche recommends to switch out of Reits to HPH Trust

HPH Trust: Deutsche recommends to switch out of Reits to HPH Trust. Notes S-REITs valuations and yield have compressed following their extended run up, and with equity issuance a potential speed bump, the house sees limited total return potential for the REITs over the next 12 mths. HPH Trust on the other hand, is Deutsche’s top yield name within its portfolio, offering 7.4% FY13e and 7.9% FY14e. The house remains positive on the Chinese ports sector, on expected strong recovery of China’s exports. Notably for HPH Trust, its HK and Yantian terminals are well positioned to seize the opportunity of growing container vessel sizes, which suggests that it should further expand its market share going forward. The house sees limited impact from the recent strike, with operations having recovered to 80-90% of normal levels. Deutsche rates HPH Trust at Buy with TP US$0.92. . StanChart believes the impact on earnings and DPU is likely to limited if the strike ends soon. While the house has an Inline rating with TP US$0.81, it would be a buyer of the stock at US$0.75 if further weakness plays out.

HPH Trust

HPH Trust: Citi says the labor disruptions at HPHT's Hong Kong port are spurring concerns over the impact on labor flexibility and likely wage-rate pressure. Highlights wage rates could be pressured upward by 10% this year on an annual basis, above the 5% estimated. Says , the notable flexibility that HIT enjoys regarding its current subcontractor labor structure (pertaining to roughly two-thirds of its operational staff) could also be in jeopardy, particularly in the current volume environment and what it believes to be structural longer-term headwinds for export growth out of South China/HK. The house cuts TP to US$0.71 from US$0.74 to reflect the selloff in Cosco Pacific (1199.HK) and China Merchants (0144.HK), resulting in lower peer P/E multiples of 14.4X and 9X respectively, compared with HPHT's 23.8X. Keeps a Sell call. While Citi appreciates the relatively higher dividend/distribution yield, it notes uninspiring fundamentals (and now a labor disruption) will weigh on the name. The stock is down 3.6% at US$0.81.

HPH Trust

 
 

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HPH Trust

HPH Trust: Quick update from DB on the on-going strike at HPH Trust's port, that operations have returned to around 80% of pre-strike level from 50% at the early period of the strike. Previously, mgmt estimated that daily revenue loss would be around HK$5m. With operations gradually picking up, DB think the revenue loss currently should be a lot less vs. initial stage of the strike. Based on numbers from 2012, DB estimate that its terminals in Hong Kong generated a total of HK$5.4bn revenue. Even assuming HK$5m loss a day, the total revenue loss since strike would only account for 1% of total revenue generated in its HK terminals in 2012. Counter lost 4.1% since the demonstrations started, currently trading at 24.4x trailing P/E, vs its 22.5x historical mean, 24.6x +1 std dev.

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HPH Trust

HPH Trust: DMG notes that Group's recent acquisition of Asia Container Terminal (ACT) at a total enterprise value of HKD3.917b, to be funded by debt (increases net gearing from 27.7% to 32%), is expected to be EPU and DPS accretive. The accretion is due to the resulting higher market share and enlarged liner clientele base, which would boost economies of scale and cost synergies on improvements in operating efficiencies. House increases earnings by 2%/ 0.5% for FY13/ FY14, consequently, this raises its DPU projections from HKD0.46/share for FY13 and FY14 to HKD0.47 per share respectively, translating to a yield of 7%-8% for FY13-FY14. DMG upgrades HPH Trust to a BUY, with TP of US$0.85.