HPH Trust

HPH Trust: Deutsche cites despite expectations on accelerating China export growth, it expects rising taxation and labour costs are likely to weigh on HPHT’s earnings and DPU in 2014. That said, after a sharp pullback in 2H2013, forward div yield has reverted to ~7%, highest since Oct’12 (except Dec 13). While Deutsche expects China’s growth export to accelerate go 14% in 2014 (8% in 2013, channel checks also suggest a pickup in exporter’s confidence), HPHT’s near term headwinds could include higher labor cost following strike at HIT last year. Expiry of tax holiday at Yantian would mean tax rate increasing by 8ppt to 20%. Deutsche reckons that volume growth + increased ASP might absorb higher labor costs, but these might not fully absorb the rising tax payment, hence, guides net profit to fall 5% y/y and DPU to drop to HK$0.36 in 2014 (HK$0.40 in 2013). Describing the stock as still attractive, Deutsche maintains a Buy with TP cut to TP$0.73 (from $0.83)