HPH-Trust – DBSV

Yantian port volumes up 6%

Yantian Port volumes pick up in April. As we had highlighted in our last report, Yantian Port data for April looked more encouraging, with volumes growing 6% y-o-y to 822.5k TEU. YTD volume growth at Yantian Port turned positive for the first time this year, at 1.2%. Over at Hong Kong Port's Kwai Tsing terminals, April volume was slightly higher y-o-y, and YTD volume growth now stands at 3.6% yo-y. Of course, HIT volumes are growing faster than overall Kwai Tsing volumes, as was evident in 1Q12 throughput data for HPH Trust, which showed HIT volumes had grown close to 9% in 1Q, compared to 4.6% growth at Kwai Tsing during

the same period. The higher growth at HIT is partly from higher transhipment volumes handled, and thus, lowers average ASPs for HPHT.

Catalysts falling in place. We had highlighted potential catalysts to stock price from better Yantian Port data as we expected a more sustainable y-o-y recovery in volumes to be noticeable from April 2012 onwards. During discussions, management has indicated that volumes have started to pick up in April and May, and export bookings to the US are looking better, though the European market still remains weak. We are conservative about the economic outlook and estimate that volumes at HIT and Yantian Ports should show modest low, single-digit growth of 2-4% this year, though management remains optimistic of achieving a 5-7% growth.

DPUs secure, maintain BUY with TP of US$0.85. We expect the Trust to meet its DPU guidance of 6.6UScts for FY12, as it can divert some cash reserves earmarked for longer-term growth capex if volume growth in the near term is not strong enough to justify acceleration of new berth developments beyond 2014/15. In 1Q12, the capex outlay was indeed 51% lower than projected. Despite the largely secure yield, share price has been pressured by ongoing macro uncertainties and the Trust is back to trading at 9% yield, which makes it one of the top yielding large caps in Singapore. Our US$0.85 TP is based on DCF valuations (7.8% WACC).