2 Key Insights from Hutchison Port Holdings Trust’s Management

Hutchison Port Holdings Trust (SGX: NS8U) is the largest business trust listed in Singapore.

As an owner of important sea ports in Hong Kong and Mainland China, there may be lessons that we can pick up from its management team. Recently, Ivor Chow, the Chief Financial Officer of the trust’s manager, was featured in an interview series by bourse operator Singapore Exchange Limited  (SGX: S68).

I picked out two key insights that may be useful for investors.

As a brief background, Hutchison Port Holdings Trust is one of the 30 components of the Straits Times Index (SGX: ^STI). The business trust has stakes in four deep-water container ports in Hong Kong and Shenzhen. These include Hongkong International Terminals (HIT), COSCO-HIT Terminals (CHT), and Asia Container Terminals (ACT) in Hong Kong, and Yantian International Container Terminals (YICT) in Shenzhen, Mainland China.

Without further ado, here are the two key excerpts taken from the interview:

Changing winds

“Sluggish economic growth in the region has had an impact on trading activity, and by extension, port operations, Chow admitted.

“With slower growth in China and globally, investors are concerned about how China is now looking more inward in terms of domestic growth rather than exports. This will invariably impact trading activity, and by extension, port operations, since the trust’s assets are located in the Pearl River Delta.””

As Chow alludes to, seaport operations relies on global economic activity to generate volume in shipping. Without volume and/or good prices, its revenue and profits may be affected. Given its location, Hutchison Port Holdings Trust has a higher sensitivity toward export activity from China. With China banking on domestic growth to spur its economy, the business trust may face headwinds.

These are external factors which may not be in the business trust’s control.

The importance of port efficiency

““The goal is to minimise the number of movements a box has to go through before it gets loaded onto a container ship in the least amount of time…

…The port plays a very important role in the supply chain, and time is money. We want to make sure these boxes are loaded and unloaded in the shortest time possible – that’s where the competitive pressure lies.””

With a few sentences, Chow highlighted the port’s main focus. External factors may not be in the ports’ control, but efficiency is. This is where Chow has his eyes on.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.