In a Wednesday report, analyst Deborah Ong notes that while HPHT has been trading at a historical P/B value of 0.66 times based on its 12 Feb closing price of 26 US cents, she no longer finds its unit levels attractive considering ongoing uncertainties on the macro level.
“The non-cash impairment of HK$12.3 billion (which includes a HK$11.4 billion goodwill impairment) was a large disappointment… In terms of the potential for future write-downs in goodwill, we believe the latest set of long-term volume growth assumptions used for Yantian of 1-3% are realistic for now,” comments Ong on the trust’s latest set of earnings.
“There is no more goodwill relating to Kwai Tsing… In other updates, we note that the Competition Commission has opened an investigation into the Seaport Joint Operating Alliance in Kwai Tsing. While we do expect cost savings from the cooperation, we await further updates on this issue,” she adds.
Further, the analyst does not approve of the manager’s commitment to continuing three more years of voluntary debt repayment, despite an expected Fed pause this year.
“Given that the program was artificially depressing distributions to unitholders (by ~11.5 HK cents a year), we were disappointed by management’s response,” says Ong.
Units in HPHT last traded 3.85% lower at 25 US cents to imply a 6.15% FY19F distribution yield before the midday break.
