• 1Q14 figures in line
• Cost pressures in FY14
• FV up marginally to US$0.68

Boost from divestment gain of ACT stake

HPHT reported 1Q14 PATMI of HK$558.9m (EPU: 6.42 HK-cents), which increased 47.0% YoY mostly due to a one-time HK$243.8m gain from the divestment of a 60% stake in ACT. Accounting for this impact, we estimate that 1Q14 PATMI would have constituted 24.1% of our full year forecast, which we judge to be mostly within expectations. In terms of the topline, 1Q14 revenues came in at HK$2944.5m, up 2.7% due to ACT’s contributions (acquired in Mar-13), a 1.9% YoY increase in YICT’s throughput and higher average revenue per TEU for HIT and YICT, but partially offset by HIT’s throughput dipping 6% YoY. Management indicates the increase in average revenues per TEU in HK was due to more favorable mix of containers from liners, whereas the increase in China was due to fewer concessions to liners and a lower empty/laden container ratio.

Outbound cargoes to US and EU showing uptrend

The trust reported an uptrend for outbound cargoes to the US and the EU – a major factor determining total container volume handled by HPHT – and management notes that growth outlooks in the US and the Eurozone remain favorable. That said, we continue to see upward pressure in terms of cost of services rendered, which increased 11.0% YoY due to higher external contractor costs and inflationary pressures. Capex in 1Q14 also rose 27% YoY to HK$311m, and management indicates that it would revive expansion plans to add one berth each year at Yantian from 2015.

Maintain HOLD

We update our valuation model for the latest data-points and our fair value estimate increases marginally to US$0.68 from US$0.63 previously. While conditions remain challenging due to a mix of rising labor costs and taxation increases, we see the downside to be limited here due to an attractive FY14F dividend yield of 8.1%. Maintain HOLD.

Source: OCBC Research - 29 Apr 2014