Broker's take: DBS upgrades Hutchison Port Holdings Trust to 'buy' on attractive dividend yield

DBS Group Research has upgraded Hutchison Port Holdings Trust (HPH Trust) to "buy" from "hold", as its current dividend yield of 11.3 per cent is seen as an attractive level for entry.

The research team has also raised its target price for the stock to US$0.14 from US$0.12, following its upgrade in earnings forecasts for the trust.

HPH Trust units were flat at 10.2 US cents by the midday break on Thursday.

The end of the trust's debt repayment programme in 2021 could also pave the way for higher dividends from 2022, as there would be room for HPH Trust to raise its distribution per unit (DPU) payout, according to DBS analyst Paul Yong.

Being in the fourth year of its five-year HK$1 billion (S$176.7 million) per annum debt repayment plan has resulted in the trust's total debt level dropping and gross debt to earnings before interest, taxes, depreciation, and amortisation ratio stabilising, he added.

DBS has raised its fiscal 2020 forecast DPU to nine Hong Kong cents from eight cents previously, after factoring in lower finance costs and government subsidies, as well as expectations of a stronger second-half performance. This comes as many countries start to relax social-distancing measures.

The research team expects DPU for the second half of 2020 to be higher than the 4.3 Hong Kong cents payout for H1. DBS is projecting a DPU of 10 Hong Kong cents for its fiscal 2021 forecast as the global economy recovers and drives higher throughput for HPH Trust.