Brokers' take

Hutchison Port Holdings Trust | Underweight

April 19 close: US$0.465

Target price: US$0.39

JP Morgan, April 19

Hutchison Port Holdings Trust (HPHT) announced Q1 FY2016 adjusted net profit after tax of HK$210 million (-26 per cent year-on-year) after excluding one-offs, which includes a one-off, after-tax, cash refund of HK$357 million (S$61.6 million) from the government. This decline was driven primarily by an 8 per cent/7 per cent year-on-year drop in total throughput/revenue. Hong Kong volumes fell 13 per cent year-on-year as transshipment demand in Hong Kong remained weak, given rationalisation from shipping alliances, while Yantian International Container Terminals volumes fell one per cent year-on-year, both trailing expectations and guidance. Although a weaker Q1 FY2016 was guided for, the recent share price rally suggests market expectations were running ahead of an anticipated recovery after initial FY2016 guidance was relatively upbeat on Hong Kong volume stabilisation (Hong Kong volumes down about 6 per cent year-on-year in FY2015). At the results call, management unveiled a new capital structure management strategy that will see HPHT lower its total debt to EBITDA gearing from about five times at present to four times by FY2021 estimated, which would have a negative impact on DPU from FY2017 estimated. We adjusted FY2016/17 estimates by +11 per cent/-3 per cent to re…