Hutchison Port Holdings Trust

AmFraser Research, Oct 22

NORMALISED net profit after tax to unitholders down 13 per cent y-o-y. HPHT reported revenue growth of one per cent y-o-y and a decline of 8.4 per cent y-o-y in net profit (NPAT) attributable to unitholders in Q3 2013. On a year-to-date basis, HPHT recorded NPAT of $1.3 billion, which is down 16.6 per cent. After stripping out the one-off performance fee and Asia Container Terminals' acquisition-related costs, we note that the normalised y-o-y decline in NPAT to unitholders would narrow to 13 per cent.

Q3 2013 was a quarter of better fortunes for HPHT's HK terminals than its Yantian ports. Due to a stronger performance in Q3 2013, throughput growth across HPHT's Hong Kong terminals improved from -6 per cent YTD June 2013 to -4 per cent YTD September 2013. Comparatively, Yantian's YTD throughput was largely flattish, owing to lower throughput volumes of empty boxes.

Given that the US has yet to exhibit concrete signs of a turnaround as well as softer-than-expected trade conditions in Q3 2013, we taper our forecasts for Yantian from 4 per cent growth to a flattish full-year performance. On the other hand, we maintain our flat throughput growth expectation for the HK terminals. Accordingly, we lower our earnings per unit (EPU) forecast from 22.3 HK cents to 21.7 HK cents in FY2013. Our FY2013 DPU is also lowered from 41.2 HK cents to 40.3 HK cents.

Overall tax expenses YTD was 7.5 per cent lower y-o-y. This was a result of the utilisation of tax credits at Yantian and lower overall profitability. We highlight that the effective tax rate at Yantian will gradually edge up beyond FY2013 as tax concessions expire in phases. We are currently pencilling in an average tax rate of 17 per cent in FY2014, up from an estimated tax rate of 13 per cent in FY13.

On Sept 25, HPHT successfully refinanced its US$3.6 billion loan and is planning to draw down its borrowings in November 2013. The loan comprises three tranches, specifically a US$1 billion one-year loan, US$1.6 billion three-year loan and a US$1billion five-year loan. All-in interest cost on the borrowings is expected to be 2.25-2.5 per cent. On a separate note, management said it plans to issue a corporate bond to refinance its one-year US$1 billion tranche in FY2014.

This essentially means that a portion of HPHT's borrowings will be converted into fixed-rate, and thus partially hedging its overall interest rate exposure.

Maintain "buy" on FV US$0.86.

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