HPH Trust

HPH Trust: Citi reiterates Sell, cuts TP to US$0.68 from US$0.72, in a note titled “Borrowing from Peter to Pay Paul”. Mgt has stated that it intends to apportion the ~HK$166m in unused capex in FY11 and the estimated HK$514m in unused capex this yr to achieve the FY12 distribution guidance of HK$4.46b laid out in the IPO prospectus (equating to HK 51.24 cts or US 6.6cts/sh). Without the cumulative ~HK$680m in deferred prefunded capex available in FY13, Citi estimates next yr’s DPU will decline 15% from the FY12 guided level. Expects earnings to be impacted by higher taxes (as tax holidays expire) and likely higher interest expense (as mgt will need to borrow debt to cover the ~HK$3.5b in future devt capex obligations over the next 3 yrs to preserve distributable cash flow and DPU). Adds while there may be mid-single digit yoy growth in throughput, the increased transshipment mix may weigh on yields and margins. Expects yield to decline to US 5.6cts /sh in FY13, yielding 7%, vs FY12e 8.5% yield.