Hutchison Port (US$0.46): 4Q15 core earnings in line, anchored on cost improvements
HPHT’s 4Q15 results were largely in line, with net profit, excluding one-offs, flat at HK$390.1m, taking FY15 earnings to HK$1.61b (+2.9%), a tad ahead of consensus estimates.
For the final quarter, revenue dipped 4.9% y/y to HK$3.03b, dragged by lower container throughput at Hong Kong and Yantian terminals amid weaker intra-Asia, US and transhipment cargoes. This was despite the ports achieving higher average revenue per TEU due to tariff hike in early 2015.
However, operating profits jumped 16.3% to HK$1.19b on lower expenses amid cheaper fuel, operational efficiencies, RMB depreciation, and one-off gain (HK$156m) from its divested interest in a Jiuzhou port. Accordingly, operating margin widened 7.1ppt to 39.3%.
Net debt position improved marginally to 0.42x from 0.44x in the previous quarter.
A lower 2H15 DPU of HK$0.187 (2H14: HK$0.223) was declared, bringing the full year payout to HK$0.344 (FY14: HK$0.41).
Management remained cautious on its outlook, citing uncertain economic growth in the US and Europe but will continue to focus on tariff increment and cost controls.
Nevertheless, its Yantian terminal is projected to deliver 3-4% volume growth from new berths that can handle mega vessels. As for Hong Kong port, the trust believes that 1H16 will remain challenging, but some recovery can be expected in 2H16.
HPHT currently offers a forward distribution yield of 8.6% (based on 2016 DPU guidance of HK$30-32¢) and trades at 0.7x P/B..
The street has 3 Buy and 10 Hold ratings, with a mean TP of US$0.54 on the port trust.
Latest broker ratings:
Deutsche maintains Buy with a TP of US$0.58.
Morgan Stanley maintains Equal Weight with TP of US$0.58
Goldman Sachs maintains Neutral, cuts TP to US$0.54 from US$0.56
HSBC downgrades to Hold, cuts TP to US$0.53 from US$0.63
JP Morgan maintains Neutral with TP of US$0.53
OCBC maintains Hold, cuts TP to US$0.46 from US$0.54
Jefferies maintains Hold, cuts TP to US$0.40 from US$0.45
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