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Hot stock: HPH Trust dives on cautious outlook, OCBC's downgrade to 'hold'

Monday, February 13, 2017 - 11:41

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UNITS of Hutchison Port Holdings Trust (HPH Trust) dived on Monday after sentiment for the counter was hurt by its downbeat outlook when it released its fourth-quarter results and a downgrade by OCBC Bank.

The counter fell by as much as 6.8 per cent to 41 US cents during morning trading. At 11.17am, it was down 5.7 per cent from last Friday's closing to 41.5 US cents after 61.84 million shares changed hands.

HPH Trust had on Friday flagged "high level of uncertainty" on the policy stance of the US administration, even as outbound cargoes to the United States escalated in the fourth quarter of 2016.

The port operator's cautious outlook on global trade came against the backdrop of lower distribution per unit (DPU) at 16.6 Hong Kong cents for the period, down 11 per cent from a year ago.

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This was due to a 27.7 per cent fall in quarterly net profit amid weaker revenue and the absence of a one-off gain. Net profit for the three months ended Dec 31, 2016, stood at HK$386 million (S$71 million), down from HK$533 million a year ago.

Its full-year DPU was 30.6 HK cents, 11 per cent below 2015's, as full-year net profit slipped 1.8 per cent to HK$1.7 billion.

Though its fiscal-year results were in line with OCBC's expectations with DPU making up 99 per cent of OCBC's forecast, analyst Deborah Ong downgraded the counter to "hold" from "buy" given the lower expected fiscal 2017 yield.

She noted that while existing business relationships with shipping liners under alliances are likely to remain intact, pricing will be under pressure as shipping liners will negotiate for the lowest rates offered to other members in the alliance.

HPH Trust is trading at a fiscal 2017 yield of 6.8 per cent, she said.

Based on dividend-discount model, Ms Ong adjusted the fair value to US$0.45 from US$0.46. "We encourage investors to collect HPH Trust at US$0.41 and below."

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