■ Overreaction to NDRC announcement
■ Look at HPHT as a whole
Results within expectations
FY17 revenue was down 3.0% YoY to HK$11.6b, or 98.1% of our fullyear forecast, with 4Q17 revenue down 3.4% YoY at HK$2.9b. Excluding HIT’s rent and rates refund in FY16, FY17 PATMI was HK$2.2b, down 15% YoY. DPU for FY17 came to 20.60 HK cents, down from 30.60 HK cents in FY16, and at 98.1% of our full-year forecast. All-in-all, full-year throughput for HPHT’s ports increased 8% YoY, with YICT’s throughput increasing 9% due to growth in US and transshipment cargoes, and Kwai Tsing throughput increasing 5% on the back of stronger transshipment volume.
7% price correction of 2 Feb too steep
As announced on 1 Feb 2018, the National Development and Reform Commission (NDRC) has reduced the “list price” or reference tariff rate for origin and destination foreign trade containers at Shenzhen – Yantian ports from RMB 1400/TEU to RMB 980/TEU. Though YICT contributes ~64% to HPHT’s top-line, it contributes less to the bottom line as a 50+% owned subsidiary of HPHT. Furthermore, we estimate that YICT’s ASP is already ~50% below the new “list price” tariff, which allows the port operator some buffer in negotiations. Following this, we believe that the impact on dividends will be only slightly negative on HPHT as a whole for FY18, and that the recent price correction has been too severe. See appendix for more analysis.
Going forward, we forecast single-digit throughput growth in FY18. We also believe the bulk of sharp ASP declines is behind us (-10% in FY17) though we expect mild softness in tariff rates going forward. We have reduced our revenue per TEU growth rate for FY18 from -2% to -4%. In our view, the main headwind for HPHT is the increase in interest costs; we currently assume three rate hikes each for 2018 and 2019. The management is guiding 20-23 HK cents for FY18F. HPHT is trading at a 7.0% FY18F yield based on our forecasts (7.1% FY18F yield based on Bloomberg consensus), as at 5 Feb 2018. After rolling our estimates forward, our fair value increased slightly from US$0.42 to US$0.43. (Read Report)
Source : OCBC Investment Research