SINGAPORE (Oct 29): OCBC Investment Research is maintaining Hutchison Port Holdings Trust (HPHT) at “buy” after management stuck to its full-year DPU guidance at 17-20 HK cents although the research house expects high volatility heading into the US mid-term elections as well as on the back of developing US-China trade tensions.

Management has noted an influx of rush orders in early 4Q18, presumably timed to beat the implementation of the US tariffs in early 2019. Meanwhile, Trump and Xi are due to meet during the G20 meeting, which is to be held on Nov 30 and Dec 1.

Looking ahead, OCBC expects more robust throughput figures in 4Q18 for both Yantian and Kwai Tsing, though it notes the front-loading of orders may result in weaker volumes for 1H19.

To recap, HPHT reported 3Q18 revenue dropped 6.1% y-o-y, with operating profit decreasing 8.9% y-o-y. PATMI dropped 11.4% y-o-y to HK$239.5 million ($42.2 million). 9M18 PATMI came up to 92% of our initial full-year forecast due to lower-than-expected revenue declines to OCBC’s overly bearish ASP projections.

See: HPH Trust reports 11% lower 3Q earnings of $42.3 mil as throughput falls; rejects ROFR offer

For 3Q18, HPHT’s throughput was down 7.3% y-o-y. 3Q18 Yantian throughput was up 0.1% y-o-y, with outbound cargoes to the US growing 4% y-o-y, while those to the EU declined 3% y-o-y. On the other hand, 3Q18 Kwai Tsing throughput was down 16.7% y-o-y, mainly due to a reduction in transshipment cargoes.

Management noted that Kwai Tsing’s September volumes were particularly bad, possibly due to the Typhoon Mangkhut. On the other hand, Kwai Tsing ASP was up 7% y-o-y mainly due to an unusually low tariff base in 3Q17, which in turn was the result of booking nine months of contractual discounts for a large customer during the quarter.

“We believe without this one-off low-base effect, HPHT’s Kwai Tsing ASPs were generally flat or up slightly on a y-o-y basis due to the decline in transshipment as a proportion of total volume,” says OCBC analyst Deborah Ong in the report.

OCBC fair value remains at US$0.36, after adjustments.

HPHT is currently trading at a 10.1% FY18F yield and at 0.42 times book which is more than two standard deviations below 0.75x its average since listing.