HPH Trust

HPH Trust: 3Q14 results in line. Net profit fell 9% y/y to HK$490.7m, due mainly to an increase in effective tax rate to 21% from 10% in 3Q13, as the tax credit at Yantian terminal had been fully used up, offset by a HK$30m exchange gain on Rmb deposits. Revenue inched higher by 1.7% to HK$3.4b. This came from robust operating results, offset by the deconsolidation of Asia Container Terminals (now 40% JV). Container throughput at Hong Kong increased 2.1% due to higher transshipment volume, offset by weaker intra-Asia cargoes. Meanwhile, the container throughput at Yantian increased by 12.4% due to growth in transshipment and US cargoes. Average revenue/TEU for Hong Kong grew from a favourable throughput mix from liners. For Yantian, average revenue/TEU was lower due to higher proportion of transshipment throughput handled. There is a possibility for a tariff hike in Hong Kong, amid strong transshipment demand. Management’s negotiation with liners is currently underway, on timing and quantum of increase. But as liners are facing headwinds, the increases are not likely to be large. On outlook, management is optimistic on the U.S. in light of positive volume trends YTD and solid economic data, but remains cautious on Europe. These, coupled by China in which management reckons should stabilize ahead, should yield single digit growth for the trust, management views. Meanwhile, HK$0.41 DPU guidance remains intact, translating to a ~7.8% yield. That said, management did not rule out an option of adjusting DPU lower to reflect future operating cashflows. Nevertheless, a marginal decrease in DPU is not expected to impact the trust much. HPH Trust trades at 0.74x P/B. Latest broker ratings: Deutsche maintains Buy with TP of $0.74 CLSA maintains U/PF with TP of US$0.71 OCBC maintains Hold with TP of US$0.68 HSBC maintains Neutral with TP of US$0.67