SINGAPORE (June 19): OCBC Investment Research is maintaining its “hold” call on Hutchison Port Holdings Trust (HPHT) with a fair value estimate of 42 US cents (58 cents).
The research house sees a better entry point below 40 US cents.
This comes after the trust saw a spike in trading volumes and unit prices last week, rallying 5.9% on Thursday alone to 45 US cents from 42.5 US cents previously, before moderating to 44.5 US cents.
“In terms of potential reasons for this trading interest, we note that the industry watches such as Drewery and Alphaliner have recently raised their forecasts for global throughput growth from a 2-3% range to 4-4.6%,” says lead analyst Deborah Ong in a Monday report.
The research house is nevertheless maintaining its expectation of a 4% gain for its Hong Kong container throughput and a 2% decline for the trust’s Yantian International Container Terminals (YICT) throughput for FY17.
This is because Ong believes the recent strength in throughput for the trust’s Hong Kong Kwai Tsing and Shenzhen containers over Jan-May 2017 may be due to temporary adjustments, as the newly-formed alliances phase in their new vessels before subsequently phasing out their old vessels.
“In addition, overall HK Kwai Tsing growth rates may not be representative of HPHT’s throughput growth, with Modern Terminals exhibiting higher y-o-y growth as it makes up for a throughput drop in 2015. Recall that in 1Q17, HPHT’s HK throughput increased 3% y-o-y, even though a 12.5% y-o-y growth was reported for Kwai Tsing container terminals as a whole,” she elaborates.
Further, the analyst sees limited visibility on tariff rates as compared to throughput trends, and expects further pricing pressure for HPHT given renegotiations with the new alliances.
“Recall that in 1Q17, HPHT HK ports saw a 4% y-o-y drop in average selling price (ASP), mainly due to these renegotiations. YICT ASP had also dropped 3% y-o-y, though mainly due to RMB depreciation,” says Ong.
As at 10.40am, units of HPHT are trading flat at 44 US cents.