HPH Trust

HPH Trust: 1Q14 net profit beat street estimates and rose 47% to HK$558.9m, while revenue climbed 2.7% to HK$2.9b. Container throughput of HK terminals fell 5.5%, mainly due to weaker intra-Asia cargoes but offset by higher transshipment volume. Throughput at Yantian increased 1.8%, due to growth in transshipment and US/EU cargoes but partially offset by lower empty volume. Average revenue per TEU for HK was higher due to favourable throughput mix of containers from liners, whereas that for China was higher than last year, primarily due to fewer concessions granted to some liners and a lower empty container ratio. Bottomline rose mainly due to the gain from the disposal of 60% stake in ACT. Stripping non-recurring items, HSBC estimated that recurring profits actually declined 12% y/y to HK$392m mainly due to cost inflation and higher effective taxes (expiry of Yantian tax concessions) Management had reiterated its guidance of HK$0.41/share distribution supported by proceeds from ACT stake sale. According to management, expansion plans is back on track as it aims to add one berth each year from 2015 to its Yantian port in Shenzhen. The expansion is estimated to cost HK$4.5b. While management indicated that most of the work is done, i.e. land formation, infrastructure; the cranes and other finishing touches have not been put in place. In addition, management does not rule out another round of delay if market conditions is not good. HPHT trades at 0.7xP/B. Latest broker ratings: HSBC maintains Neutral with higher TP of US$0.66 from US$0.62