Company Name: HUTCHISON PORT HOLDINGS TRUST
| Research House: Barclays | Price Call: HOLD | Target Price: 0.73 |
Hutchison Port Holdings Trust is down 3.05% at US$0.795 after reporting 3Q12 net profit fell 15.1% on-year to HK$601.7 million, with results around 13% below HPHT’s prospectus projection amid weak US and Europe trade demand.
Barclays says the results were disappointing, hurt by rising cost pressures and modest revenue growth amid falling average tariffs even as overall volumes rose; it notes 9M12 net profit lags at only 68% of its FY12 estimate. Barclays expects flat on-year average tariffs, but sees increasing downside risks; it finds the cost inflation concerning as HPHT has a relatively fixed asset base and slow container-volume growth is expected for the next 1-2 years.
“We see increasing risk to 2013 DPU as management highlighted in the call that delaying capex to fund the DPU will likely not to be an option in 2013.” It adds, “while we expect HPHT’s profitability to remain resilient, given the strong pricing power at Yantian, we see better value in other Chinese port names at current levels.”
It notes HPHT has outperformed peers Cosco Pacific and China Merchants year-to-date. It rates HPHT Equalweight with US$0.73 target. The stock remains up 28.2% year-to-date; the US$0.73-US$0.75 zone, where several moving averages lie, may offer near-term support.
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