4 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 four 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 four key excerpts taken from the interview:

1. Changing winds click here

2. The importance of port efficiency – click here

3. Cash is king

“Our focus is all about cashflow management – during times of relatively slower growth, how do you conserve cash and manage your capital so that dividends paid out to unitholders are not too affected.”

If Chow’s focus is on port efficiency, then cashflow management may be his key measurement metric. The business trust has to ensure that it has sufficient operating cash flow to finance its capital expenditures and dividends.

Furthermore, the volume of containers going through its ports may slow down from time to time. This may affect the amount of revenue that the company can take in. As such, conserving cash during good times is important for Hutchison Port Holdings Trust to survive in leaner times.

4. Cost cutting is overrated

“Cutting costs in some ways is overrated. Our company culture is not just about cutting costs, because that can actually reduce our capability. It’s all about doing things better than before, and making sure we spend every dollar smartly.”

Managing cash flow, though, is not about cost cutting alone. Chow is cognizant of the need to balance cost controls and how the cost cuts may limit the port’s capabilities. Instead, he aims higher in trying to make the port function better with the smarter and more efficient use of its capital.

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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.