SINGAPORE (July 20): OCBC Investment Research is downgrading its rating on Hutchison Port Holdings Trust (HPHT) to “sell” from “hold” with an unchanged fair value of 42 US cents (57 cents) on the belief that it is time for investors to take profit on the container port business trust.
HPHT on Wednesday declared a 1H distribution per unit (DPU) of 9.5 HK cents (1.66 cents), down 32% from a year ago, which was in line with the research house’s expectations.
See: Hutchison Port Holdings Trust declares lower 1H DPU of 9.5 HK cents
In a Thursday report, lead analyst Deborah Ong notes that HPHT’s 4% increase in its Hong Kong throughput was in line with the research house’s full-year forecast of a 4% gain on the back of stronger transhipment cargoes enjoyed by the trust’s ports.
Although Yantian International Container Terminals (YICT) contributed to a strong throughput gain of 10% in 2Q, which Ong says “pleasantly beat [OCBC’s] expectations of a 2% decline for the whole year, the analyst says this was offset by a larger-than-expected 5% in its average selling price (ASP) following discussions with merger members.
As such, she expects HPHT’s YICT and Hong Kong throughput growth to come in at the 4-6% range, with ASP for each forecasted to dip by 5%.
“We continue to believe that HPHT’s deep water assets will offer it a comparative advantage in the coming years when streamlining measures by the alliances exert pressure on transshipment volumes. Nonetheless, the trust is currently trading 14.2% above our fair value. Given the recent unit price appreciation, we encourage investors to take profit,” concludes Ong.
As at 11:18am, units of HPHT are trading 6.25% lower at 45 US cents.
