Hutchison Port Holdings Trust’s (HPHT) 2QFY19 revenue and other income was down 1.4% YoY, or HK$40.7m to HK$2.7b. Operating profit was flat (+0.2% YoY) at HK$838.4m in 2QFY19, and a slight 0.5% YoY increase or HK$8.0m in 1H2019 to HK$1.6b due to cost savings. PATMI in 2QFY19 declined by 20% YoY or HK$34m to HK$136.5m, mainly due to higher interest cost and lower operating income.

Combined throughput of HIT, COSCO-HIT and ACT (collectively “HPHT Kwai Tsing”) lost 5% in 2QFY19, mainly attributed to the drop in intra-Asia cargoes. The container throughput of YICT was up 4.9% YOY, driven by the growth in empty and transshipment cargoes, but offset by the decrease in US cargoes.

Note that the outbound cargoes to the US remained week in 2QFY2019 (-5% YoY) and the decline is likely to continue in 2H2019, given the USChina trade uncertainties. DPU dropped 30% from 8.52 HK cents in 1H2018 to 6 HK cents in 1H2019.

While management continues to guide 11 to 17 HK cents for FY19 DPU, management noted that the DPU is likely to trend towards the lower end of the range. We currently have a HOLD rating and fair value estimate of US$0.22.

Source: OCBC Research - 25 Jul 2019