SINGAPORE (Feb 6): DBS Vickers Securities is maintaining its “hold” call on Hutchison Port Holdings Trust (HPHT) with an unchanged target price of 39 US cents (51 cents), which is based on a discounted cash flow valuation framework with a 7.4% weighted average cost of capital and terminal growth rate of 0%.
In a Tuesday report, analyst Paul Yong says the distribution per unit (DPU) outlook for HPHT remains tepid, with throughput volume expected to remain in the low single-digit region.
This comes even as the global economy continues to improve steadily, in Yong’s opinion, although some continued pressure on average selling prices (ASPs) are expected as consolidated liners and alliances negotiate for further incentives.
As such, the analyst has cut his respective FY18 and FY19 forecasts by 10% and 13% to factor in higher non-controlling Interests and finance costs – although net profit is still projected to improve by 10% and 7% y-o-y to HK$1,042 million ($176 million) and HK$1,114 million respectively.
“We would be buyers if share price gets closer to US$0.35, at which point the prospective dividend yield would be north of 7.5%,” notes Yong.
“Like us, consensus will likely cut earnings forecasts but maintain DPU forecasts to be in the lower range of the company’s guidance… A global recession would materially impact trade and throughput numbers for HPHT, which would then have an impact on the group’s earnings and cash flows, and ultimately dividend payout,” he adds.
As at 4.47pm, shares in HPHT are trading 1 cent lower at 36 US cents, which implies a FY18 net dividend yield of 6.9%.
