OCBC Investment Research is reiterating its “hold” call on Hutchison Port Holdings Trust (HPHT) with a love fair value estimate of 20 US cents from 26 US cents previously, as analyst Chu Peng has noticed weaker performance at Kwai Tsing and recessionary pressures likely to impact throughput volume.
According to latest industry date, the throughput volume of Shenzhen’s sea port softened 2% y-o-y in November 2022 while the throughput at Kwai Tsing fell 22%/14% y-o-y in November/December 2022.
On a m-o-m comparison, the container throughput improved by 4% in November 2022 for Shenzhen. Similarly, Kwai Tsing’s throughput improved by 3% m-o-m in November and December 2022. Overall, Kwai Tsing’s throughput was 15% below its Covid-19 levels in December 2022.
Management noted that most of the cargos handled at Kwai Tsing in 3Q2022 were for transhipment due to the closure of borders. The lack of local cargo could have made Hong Kong a less attractive port to shipping lines. The analyst believes that this trend may have continued in 4Q2022 but could potentially improve in 2023 as China reopens it borders.
As HPHT is expected to report its FY2022 ended December 2022 on Feb 7, Chu believes that 2HFY2022 could continue to be impacted by supply chain and logistics/transportation disruptions due to stringent Covid-19 restrictions in Hong Kong and China.
While an interim dividend of 6.5 HK cents was declared in 1HFY2022, the management is maintaining its full-year DPU guidance of 14.5-15.5 HK cents, which Chu thinks is achievable.
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“Looking into 2023, earnings outlook remains uncertain, in our view, given a recessionary environment with major economies such as Europe and US entering into recession this year. This could impact export demand and throughput at HPHT’s ports,” says the analyst, while noting that supply chain disruptions could be easing as China exits from its zero-Covid policy.
Units in HPHT closed at 20 US cents on Jan 31, meeting the research house’s target price.
Photo: HPHT
