Hutchison Port Holdings Trust

[Greenrookie]

From the latest results,staff cost is only about 6% of the cost of service rendered, and a mere 3% to revenue. Net Margin is 28%. Yantian is the black sheep that didn't deliver or the management is overly bullish at the first place.

I bought when the price took a beating sometime last year, mainly for the following reasons:

1) Quality of assets
2) LKS brand name
3) Profits resilence during the GFC period, TEU fall in the low single digit
4) POtential for growth from Yantian development

Pearl delta economic zone is still the manufacturing hub of china, although the other provinces are catching up, while Yantian cannot be compared with Shanghai/shenzhen, I believe PRC will not let the pearl delta economic zone goes to the dogs, and YICT will be a beneficiary of any economic stimilus in the area.

The projected Capex for 2012 is 1.1 billion, and 1.7 billion HKD for 2011, assuming capex of 1.5 billion and OCF remain constant, and they payout 100% of FCF, the payout for 2013 will be reduced to 32HK cents. A rather drastic drop but still a 6% yield for me. Any better performance is a bonus for me.

I believe after this difficult time (when trading with EU and US normalised), the performance will improve.

[greengiraffe]

Hi Green Mate,

Thanks for your insightful analysis.

The declining DPU like you pointed out is the main over hang for the short term.

Indeed, you did have a good catch when share price collapsed last year but i think Mr Mkt appears to think that HPH is fair in view of circumstances facing it now.

For a boring and defensive company to lack transparency especially with a sizable bolt on acquisition could be indicative of the impending uncertainties.

GG

From the latest results,staff cost is only about 6% of the cost of service rendered, and a mere 3% to revenue. Net Margin is 28%. Yantian is the black sheep that didn't deliver or the management is overly bullish at the first place.

I bought when the price took a beating sometime last year, mainly for the following reasons:

1) Quality of assets
2) LKS brand name
3) Profits resilence during the GFC period, TEU fall in the low single digit
4) POtential for growth from Yantian development

Pearl delta economic zone is still the manufacturing hub of china, although the other provinces are catching up, while Yantian cannot be compared with Shanghai/shenzhen, I believe PRC will not let the pearl delta economic zone goes to the dogs, and YICT will be a beneficiary of any economic stimilus in the area.

The projected Capex for 2012 is 1.1 billion, and 1.7 billion HKD for 2011, assuming capex of 1.5 billion and OCF remain constant, and they payout 100% of FCF, the payout for 2013 will be reduced to 32HK cents. A rather drastic drop but still a 6% yield for me. Any better performance is a bonus for me.

I believe after this difficult time (when trading with EU and US normalised), the performance will improve.

[Greenrookie]

HPHT receive a performance fees of roughly

2.2 million units at 0.81USD =2.2 million SGD

performance fees is given when they are able to distribute dividends above the base dividends of 45.88 HKD cents, (base dividend is significant higher than what i project 2013 dividend of 36 HKD cents)

But aquisition fees will be 1% of enterprise value (Equity + net debt). There is no enterprise value given during the aquisition of ACT, but taking the cash payment for ACT of about 609 million, they will pocket 6 million SGD of fees.

In the case whereby the best of both world is not possible, I will also go for acquisition to fatten my management fees, and who cares about shareholders (Just like Lippomall managers). Of course, I am just painting a pessimistic picture, I hope they do yield accretive aquisition so that it will be a win-win situation

[Nick]

Hi Greenrookie,

Just curious - do Management team get paid from 'administrative expenses' since they are asset operators as well ? Thanks.

(Not Vested)

[Greenrookie]

Hi Greenrookie,

Just curious - do Management team get paid from 'administrative expenses' since they are asset operators as well ? Thanks.

(Not Vested)

hi nick,

they get a base fees of 2.5 million USD annually, which is subject to increase each year by such percentage representing the percentage increase (if any) in the Hong Kong Composite Consumer
Price Index

[a74henry]

This will replace F&N as an index component. (not vested)

[Greenrookie]

A article from BT:

Asia will need more port projects
Average capacity utilisation would be unsustainable without additional port investment:

http://www.businesstimes.com.sg/premium/...s-20130327

------
OCS says that recent expansion in these port regions has been driven by strong growth in intra-Asian trades, while some ports in south China, as well as Hong Kong, have been most affected by lacklustre east-west trades and a shift in export manufacturing industries to the Chinese interior and South-east Asia.
------
It says the introduction of much-larger vessels, of up to 18,000 TEUs, on the long-distance routes have major implications in terms of water depth, quay length, port access and terminal consignment sizes. OCS says these major issues must be addressed to maintain a competitive position.
At the same time the intra-Asian container shipping market is "extensive, intricate and dynamic, with a plethora of smaller ports entering the container handling industry, boosting short-sea and transshipment demand".
So it is not sufficient to handle larger vessels quickly. Short-sea and feeder ships also have to be accommodated efficiently. There is also a requirement to configure terminals to handle more laden imports, as growing prosperity boosts consumer demand generally.
--- ---

My thoughts:
HPHT operate deep water ports (Yantian and Hong kong), in a advantage position to capture those mega-vessals.

Its also operate river ports in the river delta area.

seems like there are lots of opportunities either to scale up the river ports or make further acquisitions.

(Vested)

[greengiraffe]

http://www.globalpost.com/dispatch/news/...d-pay-rise

Hong Kong port workers on strike to demand pay rise
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Over 100 workers at a Hong Kong container port operated by a firm owned by tycoon Li Ka-shing were on strike for a second day Friday as they blocked roads and staged a sit-in to demand higher wages.

Carrying banners, dock workers from Hongkong International Terminals (HIT) shouted "We will fight to the end" at a container port near the city's airport to seek a 17-percent pay rise as the protest went into its second day.

A minor scuffle broke out Thursday when some protesters stormed into the terminal in a bid to have their daily wages increased to HK$1,600 ($206) amid rising inflation costs in Hong Kong, one of the world's busiest container ports.

The workers said their salaries had only been increased once in the last 15 years, and vowed to continue the strike until the port operator was willing to meet their request.

"If the company is still unwilling to come to the negotiation table with the union, then our demands will continue," Union of Hong Kong Dockers spokesman Stanley Ho said.

A spokeswoman from HIT told AFP that the protest has not affected its operation, saying the effect was only "small". The firm has reportedly said that the protesters were workers hired through a contractor.

HIT, which operates 12 berths, is a unit of tycoon Li's Hutchison Port Holdings Trust -- part of the vast empire owned by Asia's richest man, whose firms control about 70 percent of the city's port traffic.

at/ly/pj

http://www.globalpost.com/dispatch/news/...d-pay-rise

[Greenrookie]

Email the ir officer, reply is typical and insincere: below is my question and their reply

Dear sir / madm

There is news that workers from your Hong Kong port is on strike.

As a shareholder, I am concerned that there is no official updates from the company to SGX. What are the impact on operations? And how are things coming along??

Also, I was rather concerned about the lack of transparency in terms of the announcement of the acquisitions of ACT, as there is no pro forma representation of the impact of acquisition and the estimated impact on yield.

Taken together, it seems that company are not concerned with updating the public or shareholders on material information about the company.

Regards,
----

Thank you for your interests in HPH Trust. As ACT was not a substantial acquisition, the announcement on 7 March 2013 has already provided unitholders with management's view that the deal will be accretive to unitholders from a yield perspective. Management will further discuss prospects of ACT at our next results announcement which will be at around early May 2013.

As for the recent demonstration at the HK terminal, operations at HIT are continuing at this time, although truck traffic within the terminal is slightly affected. Management is focused on addressing the situation and will make announcement on any development as appropriate.

Kind regards
----

[Nick]

The ports have a fixed lifespan - HK ports concession ends in 34 years while the Chinese ports matures a few years after. At the moment, HPHT is not retaining any of its cash earnings to repay its debt nor is it conserving cash to replenish its assets in the future. Is this policy sustainable or do you foresee concession extension with minimal charges in the future ? If not, the share price will be 0 in 2-3 decades time since the cash-flow generated thereafter will be used to repay its debt ? Or am I missing out something here ?