Hutchison Port Holdings Trust upgraded to Buy by DBS despite disappointing earnings

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DBS upgraded Hutchison Port Holdings Trust to Buy from Hold despite first-quarter earnings disappointing as Hong Kong operations lagged.

“With Hutchison Port Holdings Trust (HPHT)’s share price declining by over 10 percent since it reported its 2017 results, we believe value has emerged at the current price level, implying a dividend yield of 8 percent,” DBS said in a note on Monday. “While earnings remain unexciting given on-going price pressures, HPHT’s operations are generating sufficient cash flows to support a generous dividend payout.”

‘Highest yielding large-cap’

It added, “HPHT is now the highest yielding large cap stock in Singapore.”

HPHT’s share price could re-rate if throughput volumes can more than offset average tariff-rate declines ahead, DBS noted.

First-quarter earnings were below expectations, falling 13 percent on-year to HK$145 million, despite a 3.5 percent on-year revenue rise, as Hong Kong operations lagged, DBS said.

Yantian operations continued to outperform Hong Kong, with operating profit there rising 7.6 percent on-year to HK$783 million, DBS noted.

HPHT was also likely somewhat shielded from any U.S.-China trade war, DBS noted, as management indicated ” there should not be any
material impact from the U.S.-China trade war as the list of goods affected thus far do not form a significant portion of exports out of Yantian Port.”

DBS trimmed its target price to US$0.38 from US$0.39. The unit ended Monday at US$0.33.