ACT acquisition a good strategic fit. On 7 March 2013, Hutchison Port Holdings Trust (HPH Trust) announced its acquisition of Asia Container Terminals (ACT) for a cash consideration of approx. HKD3.2bil. HPH Trust also procured an amount of HKD750milto fund the full repayment of ACT's existing indebtedness. ACT owns and operates Container Terminal 8 West (CT8W), which has two berths

located in Kwai Chung, Hong Kong and has a concession lease that runs till 30 June 2047.

Entrenching its position as the port of choice for mega‐vessels. Equipped with the largest number of long, contiguous berths, that not only caters well to mega‐vessels but also permits the simultaneous berthing of vessels, HPH Trust stands in pole position to leverage on Hong Kong's status as a preferred regional
transhipment hub. As CT8W is situated right beside HPH Trust's existing berths, the acquisition would certainly strengthen HPH Trust's competitive edge in this regard and leave it better positioned to cater to the continuing trend of increasing vessel sizes. Moreover, HPH Trust could potentially benefit from economies of scale and reap cost savings through an integration of its container terminal operations.

Compelling forward yield of 7.4‐8.3%. We expect the acquisition of ACT to be yield‐accretive given that the deal is entirely financed with debt. We raise our DPU forecast for 2013 from HKD43.1cents to HKD45.7cents, implying a forward yield of 7.4%, which is one of the most attractive yields on offer across the S‐REIT and business trust universe at present.

Raise TP to US$0.955. Supported by the strategic positives of massive operational scale, long contiguous berths as well as the relatively resilient nature of its throughput mix, HPH Trust remains favourably positioned to ride on the burgeoning intra‐Asia and transhipment trade in the coming years. Therefore, we continue to
believe that the current degree of undervaluation in HPH Trust remains unjustified. In our opinion, current valuations represent an attractive entry point for investors to partake the benefits of HPH Trust's growth story as it unfolds.

Source: AmFraser