SINGAPORE (Apr 30):  OCBC Investment Research and DBS Group Research are maintaining their “hold” calls on Hutchison Port Holdings Trust (HPHT).

Since its upgrade of HPHT from “sell” to “hold” on Feb 25, OCBC says the business trust has posted total returns of +2.1%, versus the Straits Times Index’s +3.1%.

In addition, HPHT’s 1Q results came within expectations as revenue increased 0.3% to HK$2.7 billion ($469 million) and operating profit increased 0.8% y-o-y to HK$769.2 million.

See: HPH Trust 1Q earnings fall 33.4% to $16.8 mil as US-bound cargo volume stays weak

However, due to higher interest costs which increased to HK$274.4 million and higher tax, PATMI dropped 33.4% y-o-y to HK$96.9 million.

Management is keeping to its DPU guidance of 11 HK cents to 17 HK cents for FY19F.

Going forward, OCBC is keeping watch on global economic growth figures, ongoing discussions regarding the trade war, and possible cost-saving synergies from the Hong Kong Seaport Alliance.

“Our FY19F DPU forecast remains at 13 HK cents which translates into a dividend yield of 6.9% as at Apr 26’s closing price,” says OCBC analyst Deborah Ong.

OCBC also reiterates that HPHT is not for sale; as suggested by a Bloomberg article which has since been corrected.

“We maintain ‘hold’ on HPHT with an unchanged fair value of US$0.22,” says Ong.

Meanwhile, DBS says HPHT’s 1Q19 net profit of HK$97 million came below its expectations.

DBS says the lower net profit mainly due to higher interest cost from the four rate hikes in 2018 and an increase in tax rates as Yantian Phase I & II’s “High and New Technology Enterprise” status has expired, resulting in an increase from 15% tax rate to 25% standard income tax rate.

While profit after tax declined 10% y-o-y to HK$378 million, net profit attributable to shareholders declined by a much larger 33% y-o-y to HK$97 million.

This reflected the fact that Hong Kong operations continue to be very weak, and were a drag on HPHT’s earnings, says DBS.

“We keep our forecasts for now but note that there is downside risk to our forecasts given the weaker than expected start to 2019,” says DBS analyst Paul Yong.

As at 11.48am, units in HPHT are trading flat at 24 cents.