4Q13 operating results for Hutchison Port Holdings Trust below, but 2H13 DPU of 22.3HKcts was better than expected. The Trust is looking to deliver at least stable DPU in 2014, driven by expected operating profit improvement as a result of mid-single digit volume growth.
There were signs of improvement in US/ EU trade flows, and we look for a 3-4% volume growth in FY14 in the Trust’s ports. We maintain our view that the worst is over for HPHT and reiterate our BUY call.
While we should see improving HK operations and a mild uptick in throughput volumes next year, higher operating costs (including staff costs) and higher taxes will impact longer term valuations and hence, we cut our target price to US$0.76 (Prev US$ 0.80) to account for the above. HPHT is a proxy to global recovery theme, and prospective yield of 8.2% for FY14 is attractive.
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