Kim Eng on 7 June 2012
Background: HPH Trust’s (HPHT) assets comprise mainly deep-water container port facilities in Hong Kong and Shenzhen, namely, Hongkong International Terminals (HIT), COSCO-HIT Terminals (COSCO-HIT) and Yantian International Container Terminals (YICT). In addition, HPHT also has interests in smaller river ports and ancillary services which complement its main terminal operations.
Why are we highlighting this stock? HPHT’s share price has slid by 15% since the beginning of this year from a high of USD0.80 (IPO at USD1.01), in tandem with the decline in regional indices, despite the relatively resilient nature of the container port business. Container throughput during the financial crisis years of 2008 and 2009 fell only marginally by 1% and 4% YoY, respectively, before posting a more than 10% CAGR recovery in 2010 and 2011. Company-projected DPU payouts look enticing, notwithstanding current uncertain economic times.
A decent 1QFY12 on throughput growth. HPHT reported 1QFY12 NPATMI of HKD463m, in line with management’s projections in the IPO prospectus. This came on the back of a 5% YoY increase in throughput, which was underpinned by 9.4% YoY growth in HIT following stronger-than-expected growth in transhipment cargo.
FY12 DPU projection maintained. HPHT maintained its FY12 DPU projection of HK51.2cts, and said it will manage cash flow to maintain DPU levels, possibly deferring capex.
Risks ahead, but yield enticing. HPHT is not fully insulated from the risk of possible global economic turmoil ahead. With a third of its projected throughput comprising transhipment volumes and the remaining being “local”, its fortunes are tied to both global and domestic demand trends. However, its throughput volumes do seem resilient from a historical perspective even in times of crises, and its company-projected DPU of HK51.2cts (US6.6cts) might prove too enticing to pass up for investors looking for a forward yield exceeding 9%.
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