Three Things To Like About Hutchison Port Holdings Trust

There are only so many places in the world that you can situate a port. To be an effective port, it must be on a coastline; there has to be a good system of roads linking the port to inner cities and finally, the water must be deep enough to accommodate large ships.

Whilst many coastal cities might have desires to be a port, not many can do so because they just don’t have the necessary characteristics and geographical attributes. This is the first thing to like about Hutchison Port Holdings (SGX: NS8U) – its obvious competitive advantage. The company has controlling interests in two of the world’s busiest container ports, namely, Kwai Tsing in Hong Kong and Shenzhen in China.

Ports are a typical cyclical business. When the global economy is doing well, ports could do a brisk trade handling the many ships that load and unload their cargo, containers and passengers. But when economic times are tough, ports could be adversely affected. That is the second thing to like about Hutchison Port Holdings, especially if you are good at spotting turning points in the economy.

Currently, China is in the process of rebalancing its economy from one that is primarily export-led to one that could eventually be consumer-led. Whether China exports its way to economic growth or imports its way to economic expansion, ports are likely to play an important role.

The third thing to like about Hutchison Port Holdings is its robust Net Income Margin. Even though the global economy might be sluggish, HPH Trust has still been able to deliver an acceptable Net Income Margin of around 13%. By comparison, the margin for the 30 companies that make up the Straits Times Index (SGX: ^STI) is around 14%.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your FREE subscription to Take Stock — Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock — Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.

Like us on Facebook to keep up-to-date with our latest news and articles. The Motley Fool’s purpose is to help the world invest, better. 

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