Hutchison Port Holdings Trust outlook slashed by DBS after earnings impairment

Port facilities in Hong KongPort facilities in Hong Kong

DBS sharply cut its outlook for Hutchison Port Holdings Trust’s payouts after the port operator’s earnings missed forecasts due to a large impairment related to global trade tensions.

The bank cut its target price to US$0.26 from US$0.38 after projecting its distribution per share for 2019 would decline 12 percent on-year to 1.93 U.S. cents.

“Thus we can expect HPHT’s share price performance to continue to be lackluster,” DBS said in a note on Wednesday.

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.

It declared a final dividend of 8.48 Hong Kong cents per unit, down from 11.10 Hong Kong cents in the year-ago period, for a full-year total of 17 Hong Kong cents.

DBS forecast HPHT would report 2019 and 2020 dividends of 15 Hong Kong cents and 16 Hong Kong cents, respectively, compared with management guidance for 11 Hong Kong cents to 17 Hong Kong cents for 2019.

But DBS kept a Hold call on the shares.

“Despite a decent prospective yield of 7.4 percent on offer, we remain neutral on HPH Trust (HPHT) as it remains vulnerable to the on-going trade dispute between the U.S. and China as its key port assets in Shenzhen and Hong Kong are heavily exposed to China’s export sector,” DBS said.

“The relatively high gearing level of the trust also means that higher interest rates would also hurt its earnings and cash flows,” it added.

The shares were at US$0.25 at Thursday’s open.

 

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