Hutchison Port Holdings Ships In Lower Profits

hutchinson HPH Hutchison Port Holdings Trust’s (SGX: NS8U) third quarter earnings saw quarterly revenues inch up 1% year-on-year to HK$3.36b. Profits attributable to unit holders, on the other hand, decreased by 8.4% to HK$539m.

There hasn’t been much improvement yet in the trust’s profit-growth; its second quarter saw profits fall 15% year-on-year to HK$749m.

HPH, a component of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI), invests in, develops, operates, and manages deep-water container ports in China and Hong Kong.

The ports that fall under the trust’s banner include Yantian International Container Terminals (YICT) in Shenzhen, China; Hongkong International Terminals (HIT); Asia Container Terminals (ACT); and COSCO-HIT Terminals (CHT). The other three ports besides YICT are all based in Hong Kong.

ACT was acquired fairly recently in March 2013, and excluding it, the rest of the terminals combined handled a throughput of approximately 22.9 million twenty-foot equivalent units (TEU) last year.

For the third quarter this year, container throughput of HIT had decreased by 11.6% year-on-year due to “weaker transhipment, intra-Asia and US/EU cargoes.” Throughput of YICT saw a smaller decline at 3.5% mainly due to a drop in empty volume.

Even so, overall revenues for the trust had inched up 1% higher, as mentioned previously, due to higher average revenues per TEU in both Hong Kong and China.

In the former, a favourable throughput mix of containers from liners had driven the growth, while smaller concessions granted to liners and a lower empty/laden container ratio had contributed to the growth in the latter region.

The trust’s profit margins were slashed as costs generally increased across the board, with the appreciation of the Chinese currency and inflationary pressures being a strong factor.

It might be of interest for investors to note that the trust has HK$33.3b worth of debt in total as of 30 Sep 2013, with HK$30.4b (approximately US$3.95b) coming due within the next 12 months. HPH only has HK$3.75b worth of cash on hand but mentioned that a “US$3.6b Term Loan Facility Agreement for the refinancing of the existing facilities was signed in late Sep 2013.”

Economic growth around the world, particularly in Europe and North America, influences the volume of containers handled by HPH. On that front, the trust sees a positive outlook for the US economy. In Europe, HPH’s of the view that “the austerity measures and high unemployment rate will continue to pose a drag on [the] nascent recovery [there]”.

There are also some shifts going on in the industry. Shipping lines are deploying more mega-vessels and strengthening the cooperation with other carriers by expanding vessel sharing agreements.

Container handling’s also being centralised at hub ports to achieve efficiency, lower costs, and economies of scale.

HPH commented that its “terminals are well-positioned to capture more business from these shifts given the advantages of the state-of-the-art infrastructure, natural deep-water channels, long continuous berths and scale of operations.”

The trust last closed at US$0.765 per unit yesterday. Its units are being valued at approximately 0.8 times book value and carry a distribution yield of around 8.7% based on its pay-out last year.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.