Hutchison Port Holdings Trust (HPHT) offers “deep value” after its tumble in the wake of its removal from the MSCI index and amid an escalation in the U.S.-China trade war, OCBC said.
The stock was removed from the MSCI Singapore Index at the end of June as part of the regular index re-balancing. Among passive funds tracking the index, the iShares MSCI Singapore ETF alone has assets of US$775.28 million; HPHT had a 0.05 percent weighting in that ETF, as of the end of May.
At the same time, the U.S. trade war against both allies and other nations has been heating up. On Sunday, China warned that any trade deals with the U.S. won’t take effect if U.S. President Trump proceeds with threatened tariffs against Chinese goods, according to a Washington Post report.
HPHT owns interests in deep-water container port assets in Hong Kong and Shenzhen and has interests in port ancillary services as well as river ports.
But OCBC was unfazed.
“HPHT is seen as a proxy to the trade situation as U.S.-China tensions wax and wane, and expect volatility over the medium-term,” OCBC said in a note last week.
But it added, current share price levels are “an important buying opportunity.” OCBC estimated the proposed U.S. tariffs on US$50 billion worth of Chinese goods would have a less than 2 percent impact on HPHT’s throughput, if they are implemented.
OCBC said the trust “looks cheap” not only against its own fair value of US$0.43, but also against the Bloomberg target price consensus of US$0.35 and the lowest sell-side target price of US$0.29. It also is trading at a yield of 9.7 percent for 2018 and 10.2 percent for 2019, OCBC said. It kept a Buy call.
The unit ended Friday down 1.82 percent at US$0.27, off its year-high of US$0.485.