HPH-Trust – DMG

Strong 3Q12 throughput offset by weak ASP

Results were in-line, with 9M12 net profit accounting for 72% of our FY12F forecast. Strong throughput growth in 3Q12 was primarily driven by transshipment volumes, leading to lower ASP. HPHT guided down FY12 ASP growth from 1-2% to flat and narrowed throughput growth from 5-7% to 5-6%. They kept DPU guidance of 51.24 HK¢. With capex spending likely to fall ~HK$500m below its projection, the excess cash will be used to meet the guided dividend payout but this will come at the expense of future DPU. We raise FY12F DPU to be in-line with guidance but lower FY13 payout. Maintain Neutral with a revised DCF-derived TP of US$0.79 (from US$0.78).

Transshipment drove volume growth; Oct growth easing. HPHT achieved strong 3Q12 throughput growth of +5.6% YoY in HIT and +9.7% YoY in Yantian. A big part of the growth in Yantian came from transshipment cargoes where the mix from transshipment cargoes rose from 4% to 9%. HPHT also gained from push forward of cargoes to Sept due to the National Day Week in early Oct and bad weather at other ports. There are signs that volumes are easing in early Oct.

Higher costs eating into margins. 3Q12 EBITDA margin of 56.9% was lower compared with 61.7% in 3Q11. 3Q12 revenue growth was +2.6% YoY but staff cost and COGS grew at a faster pace of +7% YoY. Other operating income was significant lower due to a ~HK$78m swing in forex (see details in Figure 1).

Cash from deferred capex to meet FY12 DPU; lower future payout. In 9M12, HPHT spent HK$598m for capex. With full-year capex likely to be around HK$700m, we expect the HK$500m cash from lower capex spending to be paid out as dividend in FY12. However, the need for higher capex spending in FY13- 14 to meet volume growth will reduce future payout.

Revisions: (1) We revised FY12-13F net profit by ±1% and introduce our FY14F estimate. (2) We raised FY12F DPU to 51.24 HK¢ as we expect the HPHT to meet its IPO projection but lower FY13F DPU by 5% to 41.84 HK¢ (5.38 US¢).