Wednesday, July 31, 2013

HPH Trust

HPH Trust: 2Q13 results slightly ahead of estimates, as earnings fell 25.9% y/y to HK$421m mainly due to sluggish volume. The overall throughput from Hong Kong (HIT, Cosco-HIT, and ACT) was down 6.7% YoY in 2Q. The HIT itself, due to the strike, recorded 20.1% YoY decline in throughout in 2Q. While Yantian’s was off to a strong start in 1Q (+6.3% YoY), its volume fell by 1.3% YoY in 2Q, primarily due to the drop of cargo to EU and slowdown of shipments to US. Revenue of HK$3.0b declined 2.6% y/y beating estimates due to higher revenue per TEU. A bizarre occurence was that the dock strike in HK diverted the lower yielding transhipment volumes. Yantian, a beneficiary of the diversion, saw unit revenues slide as a consequence of handling more transhipped goods and a higher number of empties. Management toned down on its full year guidance and expects volume to be flattish YoY instead of 5% growth previously. Interim 1H13 DPU of HK18.7¢ was announced, 22% lower as compared to the previous period's distribution of HK24.1¢. Consensus FY13 DPU of HK40¢ remains firm, implying a forward yield of 7%. There is an upside risk of a higher DPU, as management's previous expected refinancing rate of 3-3.5% will be likely secured at below 3%. Broker recommendations: DB maintains BUY rating with TP of US$0.83; CS upgrade to NEUTRAL with TP of US$0.72; UOB KayHian maintains BUY rating with TP of US$0.88.

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