• HK$19b impairment charge
• FY15 DPU range in 33-36 HK-cents
• Tariff increases likely mid-low single digits ppt

Hit by HK$19b one-time impairment charge

HPHT swung to a 4Q14 loss (after taxes and minority interest) of HK$18,610.0m, versus a profit of HK$334.8m in the same period last year. This was mainly due to a HK$19b impairment charge on goodwill allocated to a cashgenerating unit in Hong Kong which was adversely impacted by uncertainties in the global economy, challenging trading environment and labor cost pressures. Excluding the impairment charge, adjusted net profit after tax for FY14 was HK$2,981.7m (down 0.7% mainly due to higher taxes), which constitutes 101.7% of our full year forecast and is within expectations. FY14 distribution per unit is 41.0 HK-cents; but management has guided for FY15 DPU to dip to 33-36 HK-cents, below the consensus of 38.6 HK-cents.

Outbound cargoes to EU remained soft in 4Q14

In terms of the topline, FY14 revenue increased 1.9% to HK$12,622m as throughput at HIT increased 2.1%, mostly due to higher transshipment volume but partially offset by weaker intra-Asia cargoes. At YICT, throughput was up 8.1% YoY due to higher transshipment volume, US and empty cargoes. Average revenue per TEU increased YoY in HK, but decreased in China given the higher proportion of transshipment throughput handled. While outbound cargoes to the US remain firm, volumes to the EU continue to soften in 4Q14. Cargo volume for transshipment and the niche trade routes of Far East, Africa, Central and South American and Oceania is projected to increase moderately. Management reports that it is still in discussions with the shipping lines regarding tariff increases and sees a mid-low single digit percentage increase. While the impairment is a non-cash item and will not affect the trust’s cash flow generation and debt servicing ability, we note that unitholder’s NAV per unit (after deducting DPU for both years) has dipped significantly from HK$7.26 (end FY13) to HK$4.86 (end FY14), and believe the share price will likely react negatively to the impairment charge and lower DPU guidance. Maintain HOLD with an unchanged fair value estimate of US$0.68.

Source: OCBC Research - 9 Feb 2015