Hutchinson Port

Hutchinson Port (US$0.56): 3Q15 earnings beat on tariff and cost improvements

HPHT’s delivered a 3Q15 net profit of HK$525.9m (+7.2% y/y, +31.5% q/q), beating market expectations. This brought 9M15 to HK$1.21b (-14.6% y/y) or 75% of full year consensus estimates.

Revenue rose to HK$3.5b (+2.3% y/y, +12% q/q) on firmer average revenue per TEU following tariff hikes of 4-5% for half of its shipping clients in Hong Kong and Yantian, China.

However, container throughput at Hong Kong terminals suffered (+9.2%) from weaker intra-Asia and transhipment cargoes, and overshadowed throughput growth at its Yantian terminal (+4.7%), thereby partially weighing on the group’s top line performance.

EBITDA margin expanded 1.6ppt to 58.2% on lower costs, primarily due to lower throughput handled and fuel savings.

Moving forward, management guided a tepid container volume outlook for 4Q15 amid lukewarm economic growth in US and Europe.

Despite the challenging environment, management is confident of reaching its FY15 DPU target of HK$0.33-0.36, as they continue to focus on tariff and cost improvements.

HPHT is currently trading at 0.9x P/B and offers a distribution yield of 7.9%.

The street has 4 Buy, 7 Hold and 2 Sell, with a consensus TP of US$0.60.

Latest broker ratings:
HSBC upgrades to Buy, cuts TP to US$0.63 from US$0.65
Deutsche maintains Buy with TP of US$0.62