DBS Group Research analyst Paul Yong has kept his “buy” recommendation on Hutchison Port Holdings Trust (HPHT) after the trust’s “stellar” results for the FY2021 ended December roundly beat Yong’s expectations.
On Feb 9, HPHT reported FY2021 net profit of HK$1.75 billion ($301.0 million), up 110% y-o-y on exceptional storage, while its distribution per unit (DPU) for the FY2021 came up to 14.5 HK cents, above the brokerage’s street high forecast of 14 HK cents.
The trust’s strong performance, which was mainly led by higher storage income, is expected to partially continue into the FY2022 as port congestions remain high.
On account of this, Yong has increased his earnings estimates for the FY2022 by 25%. Earnings for the FY2023 are also expected to remain stable from FY2022 on higher container handling rates and lower costs, which will offset lower storage income.
HPHT’s earnings are expected to remain resilient in the next few years, says Yong. “[This is] despite throughput volume uncertainty in the near term and higher interest rates, as the trust has undertaken a series of cost management programmes to lower its cost base and has reduced its total debt by nearly HK$5 billion in the last five years,” he writes in his Feb 10 report.
Looking ahead, Yong sees more upside to HPHT’s DPU guidance of 14.5 – 15.5 HK cents in FY2022.
“With strong cash flow generation, resilient earnings, and a rapidly improving balance sheet, we believe there is room for HPHT to raise dividends further in the next few years. Stock is attractive at 7.9% prospective yield in our view,” he says.
To this end, Yong has also upped his target price estimate to 37 US cents (50 cents) from 33 US cents previously.
The target price estimate is said to be the highest on the street as Yong believes the trust will see “sustained improvement” in its earnings and DPU.
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That said, a downside risk to HPHT would be a global recession that would materially impact trade and the trust’s throughput numbers. That, in turn, would have a negative impact on HPHT’s earnings, cash flows and dividends, says Yong.
As at 3.45pm, shares in HPHT are trading 0.5 US cents lower or 1.92% down at 25.5 US cents, or an FY2022 P/B of 0.7 times and DPU yield of 7.9%.
Photo: HPHT
