Hutchison Port Holdings Trust - DBS Research 2023-02-08: Dividend Upside To Drive Re-rating

• Hutchison Port Holdings Trust (SGX:NS8U) reported FY22 net profit of HK$1,099m, which is 8% below our forecast, representing a 37% decline y-o-y. Revenue fell by 8% y-o-y to HK$12.2bn in FY22 from HK$13.2m in FY21, due to:
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  2. lower storage income at Yantian, although partially offset by higher storage income at HK ports;
  3. a change in cargo mix; and
  4. RMB depreciation.
• Other operating income declined by 65% y-o-y to HK$146.2m as a result of lower government subsidies.
• As interest rates have spiked, Hutchison Port Holdings Trust’s interest costs rose by 9.2% y-o-y to HK$673.3m in FY22. However, going forward, this will be mitigated by continual debt repayment and interest rate hedges on ~71% of its long-term debt as at 31 December 2022 - See Hutchison Port Holdings Trust's announcements dated 07 Feb 2022.
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• Management guided for DPU of HK$0.14 to HK$0.15 in FY23F, but we expect DPU to come in at the top end of the guidance, at HK$0.15 in FY23F. Further, we believe that that there is room for Hutchison Port Holdings Trust's DPU to be raised to HK$0.20 in FY24F as the Trust deleverages to an all-time low and the Fed rate hike cycle ends. See Hutchison Port Holdings Trust's dividend history.

Well positioned to benefit from China’s reopening.

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Above is the excerpt from report by DBS Group Research.
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