HPH-Trust – OCBC

4Q13 one-off items hit P&L

• Misses expectations
  
• Cost pressures in FY14
  
• Reduce FV to US$0.63
  

PATMI nearly halves

HPHT reported 4Q13 earnings results that were lower than ours and the street’s expectations due to one-off items: (1) concession to shipping lines (translating into lower average revenue per TEU for HK) after previous industrial action at HIT, (2) write-off of upfront fee after US$3.6b bank loan refinancing, and (3) exchange loss from the conversion of USD to HKD for repayment of bank loan for the ACT acquisition. 4Q13 revenue fell 0.8% YoY to HK$3.12b. Total operating expenses increased by 10.9% to HK$2.17b. PAT dropped 34% to HK$644m. PATMI fell 47% to HK$335m. 4Q13 throughput volume for HIT was down 10.1% YoY, but HK throughput was down only 2% for FY13 due to the acquisition of ACT in Mar 2013. 4Q13 throughput for Yantian (Shenzhen) was up 4.7% YoY, translating into a 1% growth for FY13. The portfolio as a whole registered a 1% decline in FY13.

FY14 guidance

Management anticipates mid-single digit growth in volume for its HK and Shenzhen ports, with 1-2% increase in ASP. Due to the expiry of tax holidays for some phases of Yantian, management foresees a tax rate of 19-20% for FY14, versus the 12% in FY13. There will also be the full year impact of the 9.8% wage increase for port workers decided on in early May 2013. Capex delayed in FY13 will be pushed over to FY14 (HK$1.5b-2.0b). FY13 DPU is 41 HK cents, and management’s internal target is to reach a similar figure for FY14. While FY13 operating profit had contracted by 9.5%, cash generated from operations expanded by 10.2%, and management says there will continue to be a gap between profitability and cash flows in FY14.

Maintain HOLD

Lowering our DPU forecasts, we reduce our FV on HPHT from US$0.74 to US$0.63. We maintain a HOLD rating on HPHT. HPHT is trading at a FY14F dividend yield of 8.0%.