• Error in Bloomberg report
• 1Q19 operating profit stable…
• But PATMI affected by higher interest costs

Results Within Expectations

Hutchison Port Holdings Trust’s (HPHT) 1Q19 results were within expectations. Revenue increased 0.3% to HK$2.7b while operating profit increased 0.8% YoY to HK$769.2m. However, due to higher interest costs (which increased HK$45.4m YoY to HK$274.4m) and higher tax, PATMI dropped by HK$48.5m or 33.4% YoY to HK$96.9m – making up 25% of our fullyear forecast.

Throughput Down 2% YoY for the Quarter

HPHT’s throughput for 1Q19 was down 2%. In particular, YICT’s throughput was up 5% due to a 14% growth in empties as well as growth in transshipment cargoes. Outbound cargoes to the US declined 5% YoY, slightly less severe than what was expected by management given the front-loading of orders in 4Q18.

Meanwhile those to the EU grew 1% YoY. On the other hand, Kwai Tsing throughput was down 10%, due to the decrease in transshipment cargoes as well as a high base effect as throughput in 1Q18 was boosted by one-off activity from the Japanese alliance consolidation. In terms of ASPs, Yantian ASP was down 3% mainly due to the depreciation of RMB by 5%; half of Yantian revenue is in RMB.

Kwai Tsing ASP increased 8% due to the mix of the type of service – an increase in barge vessel cargoes as opposed to vessel-to-vessel cargoes. As a whole, management noted that the base rate for both Yantian and Kwai Tsing remain stable.

Typo in Bloomberg Report! HPHT Is Not for Sale

Separately, we note that there was a typo in a Bloomberg report on Friday afternoon wrongly suggesting that HPHT was for sale. HPHT is *not* for sale; the Bloomberg article has been corrected.

Since our upgrade from Sell to Hold on 25 Feb, HPHT has posted total returns of +2.1%, versus the Straits Times Index’s +3.1%. Management is keeping to its DPU guidance of 11 HK cents to 17 HK cents for FY19F.

Our FY19F DPU forecast remains at 13 HK cents which translates into a dividend yield of 6.9% as at 26 Apr’s closing price. Going forward, we keep watch on global economic growth figures, ongoing discussions regarding the trade war, and possible cost-saving synergies from the Hong Kong Seaport Alliance. We maintain HOLD on HPHT with an unchanged fair value of US$0.22.

Source: OCBC Research - 29 Apr 2019