Towards Financial Freedom
HPHT - Worker Strike Ends
The protesting dock workers, who have been on strike for 40 days, have yesterday finally accepted the revised offer of a 9.8% wage increase. The union is in discussion with the workers to begin returning to work as early as tomorrow. As the strike ended within our expected time frame, we maintain our earnings estimates. We also retain our NEUTRAL stance and USD0.82 FV. Macro outlook is still too bleak to boost container throughput volume while liners are consolidating.
- Strike comes to an end. The protesting dock workers, who have been on strike for 40 days, has yesterday finally accepted the revised offer of a 9.8% wage increase, which they had rejected a few days earlier. The 9.8% increase replaces the earlier increment offer of 7% made sometime end-April. The union is in discussion with workers to begin returning to the port as early as tomorrow. The strike ended within our forecasted time frame - we had expected the dock workers to return to work by 15 May at the latest. We see this as a win-win situation for both workers and the port.
- Impact on earnings. We had earlier cut our earnings forecasts after revising down our throughput assumption and upping our staff cost forecast per twenty-foot equivalent unit (TEU) by as much as 12% y-o-y per TEU to reflect the pass through costs from the contractors. We make no changes to our earnings estimates.
- Maintain NEUTRAL. We retain our NEUTRAL stance and fair value of USD0.82 premised at a cost of equity of 8%. We had earlier cut our DPU estimates by 8% / 2.5% / 3.7% for FY13/ FY14/ FY15 respectively. Although this latest development is positive, we think the company's earnings outlook will be hampered by the slow recovery in global container trade as the macro picture remains in cautious mode. Furthermore, the consolidation of liners has also resulted in more efficient throughput management, which does not bode well for port operators on the lower throughputs handled.
Source: OSK
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