Wang and Yong expect HPHT’s total throughput growth to reach 4.5%/3.1% in FY2024/FY2025, factoring in Yantian’s robust volume performance.
However, they reduce their FY2024 earnings estimates by 24% as overall volume growth is expected to be eroded by lower associate contributions and a higher tax rate.
The analysts say that HPHT’s interim distribution per unit (DPU) of 5 HK cents slightly missed their expectations, and HPHT’s management says that sustaining the 2023 DPU level will be challenging in 2024.
“We therefore lowered the DPU forecast for FY2024 to 13 HK cents, slightly lower than FY2023’s 13.2 HK cents,” they say. “Nonetheless, we expect some room for improvement in 2H2024 DPU, given the potentially easing interest cost pressure.
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The analysts note that assuming there is a 50 basis points (bps) increase in refinancing interest rates and a 100 bps decrease in floating rates as expected by DBS, the effective debt cost will decrease to 3.2% from the current annualised cost of 3.4%.
“This reduction could lead to a 3.9% increase in FY2025’s DPU if savings on interest costs are used to pay dividends,” they add.
The analyst highlighted that slower global and economic growth could lead to lower volumes for HPHT, and higher-for-longer interest rates would pressure its margins.
“We believe the stock will rerate as its yield compresses, along with a US Fed rate cut in the next 12 months,” they say. Their target price is 22 HK cents based on a discounted cash flow-model valuation, and they note that the implied dividend yield of 13% for FY2024 remains attractive.
As at 2.56pm, shares in Hutchison Port Holdings Trust are trading 0.1 US cents higher or 0.8% up at 12.6 US cents.
