HPH Trust

HPH Trust: Group acquired 100% of Asia Container Terminals (ACT) Holdings Ltd for HK$3.2b (approx. S$509m), from DP World ACT Holdings Ltd, DP World 8 Ltd and PSA China Pte Ltd. Concurrently, HPH Trust also procured the payment of an amount of HK$750m (approx. S$121m) in cash to fund the full repayment of the existing indebtedness which was owing by the ACT Holdings group to the respective affiliates of DPW and PSA. Full payment was debt financed (current debt int. rate at 2% blended). Assuming the new terminal has similar EBITDA margins, the valuation implied which HPH Trust paid for the terminal would be an 11.5x EV/EBITDA, which is at the lower end of listed comparables. Consolidated net tangible assets of ACT Holdings as at 31 December 2012 of HK$625m (approximately S$100m), and ACT Holdings has the opportunity to increase the handling capacity of HPH Trust’s container terminals in Hong Kong and the potential to enhance the operational efficiency with other HPH Trust’s container terminals in Hong Kong. ACT Holdings owns and operates Container Terminal 8 West, located at Kwai Chung, Hong Kong under a lease from the Hong Kong Government for a term expiring on 30 June 2047. Container Terminal 8 West has 2 container berths. Its TEU throughput for 2010, 2011 and 2012 was 1.2 million, 1.1 million and 1.0 million, respectively (declining about 8% each year). This acquisition is next to HPH Trust's 4, 6, 7, 9, 8 East Terminals, which they jointly control with Cosco. Street analyst notes that acquisition will give HPHT even more economies of scale, and the price/TEU appears to be 40% below HPHT's own valuation per TEU, which wld indicate a possible 5% DPU uplift. CS however, has an UNDERPERFORM rating, increasing its TP to US$0.79.