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Broker's take: Pressure on volumes ahead for Hutchison Port Holdings Trust
THE restructuring of several shipping alliances suggests pressures on throughput volume ahead for Hutchison Port Holdings Trust (HPHT), OCBC Investment Research said on Tuesday.
This comes after, among other forms of restructuring, the merger of the Cosco and China Shipping, as well as CMA CGM's acquisition of NOL and its container carrier APL.
"We take the recent M&A activity to be a sign that shipping lines are under pressure to cut costs in the face of low rates," said the brokerage, which had a "hold" rating on HPHT. "Rationalisation of port usage is expected to continue well into next year, posing a drag on throughput volumes for HPHT's FY16 and FY17."
It noted that HPHT's assets look well-positioned to outperform the industry due to its suitability for mega-vessel deployment, but also noted that Shanghai's proposal for the liberalisation of cabotage - the trade or transport in coastal waters between two points within a country - in China could pose a serious threat to Hong Kong's position as a transhipment hub.
It has a target price of US$0.46 on the stock. Shares of HPHT were unchanged at US$0.495 as at 10.20am.