Quarterly Earnings Alert: More Trouble Ahead For Hutchison Port Holdings Trust?

Container port owner Hutchison Port Holdings Trust (SGX: NS8U) is the only business trust to be included in the Straits Times Index (SGX: ^STI).

But, the trust has not been a good performer at all since it was listed here in 2011. Its units have declined close to 50% in price since the IPO.

Yesterday evening, the business trust released its results for the first-half and second-quarter of 2016. Here are the highlights.

Business highlights

Revenue for the first-half of 2016 fell by 6.4% year-on-year to HK$5.7 billion. This was due to lower container throughput at its ports. The trust has seen some improvement in outbound cargo to US and Europe in the first-half of 2016. But, that was offset by much weaker intra-Asia and transshipment cargo flow.

Although operating profit still managed to improve by 14.3% year-on-year to HK$2.1 billion, it was mainly due to a government rent and rate refund of HK$430 million that the trust received. Without the refund, Hutchison Port Holdings Trust would have experienced an 11% drop in its net profit for the first-half of 2016; net profit attributable to unitholders would also have declined by 18% year-on-year.

The trust did not slow down capital spending in the reporting period, as capital expenditure in the first-half of 2016 came in at HK$1.28 billion, up 46% from a year ago.

In any case, the trust’s distribution to unitholders for the first-half of 2016 had declined by 10.8% year-on-year to HK$0.14 per unit.

The outlook

The outlook for Hutchison Port Holdings Trust looks gloomy.

In the earnings release, the trust commented that the United Kingdom’s decision to leave the European Union might have a negative impact on global trade. And that’s with the backdrop of outbound cargos to the US growing weak in the second-quarter after a strong first-quarter.

Moreover, the recent service rationalisation of global shipping alliances has put pressure on shipping volumes.

Having said that, the trend of shipping lines moving toward the use of mega-vessels might be good for Hutchison Port Holdings Trust. It said:

“[Hutchison Port Holdings] Trust’s natural deep-water channels and unparalleled mega-vessel handling capabilities position it to be the preferred port of call for mega-vessels and [Hutchison Port Holdings]Trust is expected to benefit from these developments.”

Hutchison Port Holdings Trust is now trading at a price of US$0.48 per unit and has an annualised distribution yield of 7.5%

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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 writer Stanley Lim doesn’t own shares in any companies mentioned.