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Hutchison Port Holdings Trust’s Latest Earnings: A Lackluster Quarter

Hutchison Port Holdings Trust (SGX: NS8U) released its fiscal third-quarter earnings report yesterday evening. The reporting period was from 1 July 2016 to 30 September 2016.

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

 Financial highlights

The following’s a quick summary of some of Hutchison Port Holdings Trust’s latest financial figures:

  1. Revenue for the third-quarter was HK$3.26 billion, a 6.8% decline compared to the same quarter last year.
  2. For the reporting quarter, profit attributable to unitholders slipped 18.2% to HK$430.2 million compared to the previous year.
  3. As a result, earnings per unit (EPU) also came in at 4.94 HK cents, down 18.2% from the same period last year.
  4. Consequently, NAV was down 2.7% to HK$4.71 in the reporting quarter compared to HK$4.84 on 30 September 2015.
  5. As of 30 September 2016, Hutchison Port Holdings Trust had HK$6.33 billion in cash and equivalents and HK$33.7 billion in total borrowings. This compares with the HK$5.78 billion in cash and equivalents and HK$33.2 billion in total borrowings seen a year ago. So, Hutchison Port Holdings Trust’s balance sheet has remained largely unchanged.

Hutchison Port Holdings Trust’s revenue had fallen primarily due to a decrease in throughput at HIT (of 5.3%) and YICT (of 6.6%). There was weaker intra-Asia and transshipment cargoes at HIT and weaker empty and transshipment cargoes at YICT.

Valuation and outlook

In the earnings release, the business trust’s manager had summed up Hutchison Port Holdings Trust’s outlook with the following commentary:

“Outbound cargoes to US showed a mild rebound in the third quarter of 2016 after a weak performance in the second quarter.  US economy is regaining its growth momentum and economic activity has increased at a faster pace.

On the other hand, the growth in outbound cargoes to Europe slowed down in the third quarter of 2016.  Weak consumer sentiment, high unemployment rate and the knock-on effects from Brexit continue to affect its economic recovery and the pickup of the European trade.

Other than the economic performance of the US and Europe, HPH Trust’s performance is also affected by the outcomes of structural changes occurring in the container shipping industry.  The service rationalisation of various global shipping alliances has negatively impacted the transshipment volume of both HIT and YICT over the past few quarters.”

The manager also added that Hutchison Port Holdings Trust’s performance would be affected as well by structural changes happening in the container shipping industry.

All told, the business trust’s manager portrayed a cautious stance on the expected cargo volume in 2016 given the soft global trade outlook. Hutchison Port Holdings Trust will continue to focus on its cost reduction activity.

Hutchison Port Holdings Trust last traded at a price of US$0.45 per unit yesterday. At the level, it offers a trailing distribution yield of 9.1%.

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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 James Yeo doesn’t own shares in any companies mentioned.