Hutchison Port Holdings Trust downgraded to Sell from Buy by OCBC after impairment

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OCBC downgraded Hutchison Port Holdings Trust, or HPHT, to Sell from Buy after its earnings missed following a large goodwill write-down.

On Tuesday, Hutchison Port Holdings Trust, or HPHT, reported a fourth quarter net loss of HK$12.11 billion (S$2.10 billion or US$1.54 billion), swinging from a year-earlier net profit of HK$237.8 million on impairments related to trade tensions. Impairment of goodwill was HK$11.36 billion, while impairment of an investment in a joint venture was HK$930 million, HPHT said.

HPHT pointed to increased uncertainty over global trade, which was spurring multi-national companies to diversify production bases outside of China, and structural changes in the shipping line industry.

OCBC said the impairment reduces the trust’s net asset value per unit by 31 percent on-quarter to HK$3.07, or around US$0.39, leaving the unit price trading at a historical price-to-book-value of 0.66 times, based on Tuesday’s closing price.

“While this figure is still below the five-year average of 0.73 times, we no longer find HPHT’s price levels attractive given the macro uncertainties,” OCBC said in a note on Wednesday, although it added it didn’t expect further goodwill write-downs.

The bank also noted that HPHT management appeared to be sticking with its plan for three more years of voluntary debt repayment.

“Given that the program was artificially depressing distributions to unitholders (by approximately 11.5 Hong Kong cents a year), we were
disappointed by management’s response,” it said.

It lowered its fair value to US$0.22.

The unit price was down 3.85 percent at US$0.25 at 4:52 P.M. SGT.

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