HPHT trading at ‘significant value’ despite recent rally: OCBC

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Shares of Hutchison Port Holdings Trust may have rallied nearly 11 percent in a week, but it still has room to rally further, OCBC said.

The stock is still down more than 25 percent so far this year, it noted, pointing to three factors: China’s National Development and Reform Commission (NDRC) cutting the “list price” by 30 percent for Shenzhen ports, the U.S.-China trade tensions and thirdly, the stock’s removal from the MSCI Singapore index, which spurred selling from index and institutional funds.

“Based on what has been announced so far, we see little impact operationally for the first two factors and no change in fundamentals following the third,” it said. It kept a Buy call on the unit.

On the NDRC concerns, it said it estimated HPHT’s Yantian is already charging rates below the new list prices, with first quarter results already indicating fears over the price cuts were “overblown.” It also noted that the list of goods targeted by U.S. tariffs on US$50 billion of Chinese goods make up less than 2 percent of HPHT’s throughput.

“Furthermore, we believe it would be unrealistic to assume that this throughput related to these goods would cease completely as a result
of tariffs,” it said.

But OCBC said that after adjusting its beta assumptions, or risk view, it cut its fair value to US$0.375 from US$0.43.

“Overall, we still see significant value at current prices,’ it said.

The unit ended Thursday flat at US$0.305.

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