Hutchison Port Holdings

Kim Eng on 4 Feb 2013

4Q results in-line, 2H2012 DPU as promised. Hutchison Port Holdings Trust (HPHT) reported 4Q results that were in line with our forecasts as FY2012 EBITDA came in at 2% above our estimates. As expected, 2H2012 DPU of HK27.19 cts /share was declared, bringing FY2012 DPU to HK51.24 cts, exactly in line with IPO prospectus projections. Although FY2013 will have a market-expected dip in DPU, HPHT remains a solid yield play (~8% p.a.) when put in perspective with S-REITs which currently trade closer to ~5% p.a. Reiterate BUY.

Deferred Capex again a hot potato. Questions were once again raised about the sustainability of FY2012 DPU levels going forward due to the fact that distributions were only achieved this year through a deferral of capex. Management stated that no further deferral of capex would be planned in 2013, and barring an extremely positive business environment, FY2013 DPU would come in at lower levels - something which is already expected by the market.

Volumes strong, HK leads the way. FY2012 volumes posted a credible 5% growth YoY: HK leading the way with a 5.4% YoY increase and Yantian posting a 3.9% YoY increase. Outlook tentative, but more positive signs now. Management sounded more optimistic about the US and Chinese economies although this will be mitigated by the uncertain European situation. They also stated that the trend of an increasing  proportion of megavessels will benefit HPHT’s ports given their natural deep water channels and scale.

Don’t miss the forest for the trees, reiterate BUY. We leave our forecasts largely unchanged, as we introduce our FY2015 estimates. As the market has already priced in FY2013’s weaker DPU, we advise investors not to miss out any further on a stock with sustainable yields of 7.6-8.3% p.a. Reiterate BUY, with DDM-based Target Price of USD0.93 implying a 20% total return including distributions.