Hutchison Port Holdings Trust

[Temperament]

i think there many more to things to look out for when looking at FCF. Like one-time cash flow or other cash flows that are not generated by regular business operations. Accounts receivable/payable, inventory-Is there any "doctoring here? If you can spot it, really excellent. And many more things to look out for that i might have not even read about it. imho.

[Nick]

http://research.uobkayhian.com/content_d...7d1817795c - a report from UOB on the operational performance of ports in China. Personally (just based on their numbers), Cosco Pacific seems fairly decent ?

(Not Vested)

[GPD]

Hi all,

I have recently vested in HPH and is now trying to work out the distributable income (you can tell I have done it the wrong way). From page 87 of its prospectus, the distributable income is defined as:
Any proposed distributions by HPH Trust will be paid from its Distributable Income, which consists of cash flows from dividends and principal and interest payments (net of applicable taxes and
expenses) received by HPH Trust from the entities held by HPH Trust, and any other cash received by HPH Trust from the entities held by HPH Trust, after such cash flows have been applied to:
- pay the operating expenses of HPH Trust, including the Trustee-Manager’s fees;
- repay principal amounts (including any premium or fee) under any debt or financing arrangement of HPH Trust;
- pay interest or any other financing expense on any debt or financing arrangement of HPH Trust; and
- provide for the cash flow needs of HPH Trust or to ensure that HPH Trust has sufficient funds and/or financing resources to meet the short-term liquidity needs of HPH Trust. HPH Trust’s distribution policy is to distribute 100% of HPH Trust’s Distributable Income.

I am having problem figuring out from the past financial statements how the manager work out this "distributable income".
First they only report the "Cash generated from operations" so I cannot relate it to the income statement.
Second the above definitions suggested to me that the distributable income is pretty much the net change in cash over the two quarters. However, since 2012, it seems to me that the trust didn't generated enough cash to pay the distribution and has been drawing on existing shareholder funds to finance payout (increasing negative reserves) let alone capex (in Q1 this year, the is a loan of HKD 4000 millions for acquisitions, without which the cash position would be negative for that quarter).
So I cannot figure out how they determine the "distributable income".

From Nick's link to UOBKayHian article, it was mentioned that is a guided 40HK cents DPU for FY2013. This translated to about HKD 1855 million in cash just for unitholders for the next payout. I assumed another HKD 795 million is needed for non-controlling interest. This drained another HKD 2650 million off the current cash of HKD 3750 million. Based on current their position, unless there is a huge turnaround in cash from ops in the coming quarter to positively impact the cashflow and replenish shareholder's fund, I think I might have make a wrong move.

While TMS recently bought in at US$0.73, Capital Group dumped loads more at US$0.68.

Glad for any insights.

(recently vested but thinking hard now!)

[investingsgx]

Hi all,

I have recently vested in HPH and is now trying to work out the distributable income (you can tell I have done it the wrong way). From page 87 of its prospectus, the distributable income is defined as:
Any proposed distributions by HPH Trust will be paid from its Distributable Income, which consists of cash flows from dividends and principal and interest payments (net of applicable taxes and
expenses) received by HPH Trust from the entities held by HPH Trust, and any other cash received by HPH Trust from the entities held by HPH Trust, after such cash flows have been applied to:
- pay the operating expenses of HPH Trust, including the Trustee-Manager’s fees;
- repay principal amounts (including any premium or fee) under any debt or financing arrangement of HPH Trust;
- pay interest or any other financing expense on any debt or financing arrangement of HPH Trust; and
- provide for the cash flow needs of HPH Trust or to ensure that HPH Trust has sufficient funds and/or financing resources to meet the short-term liquidity needs of HPH Trust. HPH Trust’s distribution policy is to distribute 100% of HPH Trust’s Distributable Income.

I am having problem figuring out from the past financial statements how the manager work out this "distributable income".
First they only report the "Cash generated from operations" so I cannot relate it to the income statement.
Second the above definitions suggested to me that the distributable income is pretty much the net change in cash over the two quarters. However, since 2012, it seems to me that the trust didn't generated enough cash to pay the distribution and has been drawing on existing shareholder funds to finance payout (increasing negative reserves) let alone capex (in Q1 this year, the is a loan of HKD 4000 millions for acquisitions, without which the cash position would be negative for that quarter).
So I cannot figure out how they determine the "distributable income".

From Nick's link to UOBKayHian article, it was mentioned that is a guided 40HK cents DPU for FY2013. This translated to about HKD 1855 million in cash just for unitholders for the next payout. I assumed another HKD 795 million is needed for non-controlling interest. This drained another HKD 2650 million off the current cash of HKD 3750 million. Based on current their position, unless there is a huge turnaround in cash from ops in the coming quarter to positively impact the cashflow and replenish shareholder's fund, I think I might have make a wrong move.

While TMS recently bought in at US$0.73, Capital Group dumped loads more at US$0.68.

Glad for any insights.

(recently vested but thinking hard now!)

Hong kong property sector will face some headwinds in the future which kept investors worried.

Source: http://www.businessinsider.com/hong-kong...rm-2013-11

But if you still believe in the fundamentals, then you should stick to it.

[valueinvestor]

HPH 's revenue can be volatile , swing can be wide. Why Superman wanted to unload these port assets ? Not difficult to know the answer IMO.

[Greenrookie]

Hi all,

I have recently vested in HPH and is now trying to work out the distributable income (you can tell I have done it the wrong way). From page 87 of its prospectus, the distributable income is defined as:
Any proposed distributions by HPH Trust will be paid from its Distributable Income, which consists of cash flows from dividends and principal and interest payments (net of applicable taxes and
expenses) received by HPH Trust from the entities held by HPH Trust, and any other cash received by HPH Trust from the entities held by HPH Trust, after such cash flows have been applied to:
- pay the operating expenses of HPH Trust, including the Trustee-Manager’s fees;
- repay principal amounts (including any premium or fee) under any debt or financing arrangement of HPH Trust;
- pay interest or any other financing expense on any debt or financing arrangement of HPH Trust; and
- provide for the cash flow needs of HPH Trust or to ensure that HPH Trust has sufficient funds and/or financing resources to meet the short-term liquidity needs of HPH Trust. HPH Trust’s distribution policy is to distribute 100% of HPH Trust’s Distributable Income.

I am having problem figuring out from the past financial statements how the manager work out this "distributable income".
First they only report the "Cash generated from operations" so I cannot relate it to the income statement.
Second the above definitions suggested to me that the distributable income is pretty much the net change in cash over the two quarters. However, since 2012, it seems to me that the trust didn't generated enough cash to pay the distribution and has been drawing on existing shareholder funds to finance payout (increasing negative reserves) let alone capex (in Q1 this year, the is a loan of HKD 4000 millions for acquisitions, without which the cash position would be negative for that quarter).
So I cannot figure out how they determine the "distributable income".

From Nick's link to UOBKayHian article, it was mentioned that is a guided 40HK cents DPU for FY2013. This translated to about HKD 1855 million in cash just for unitholders for the next payout. I assumed another HKD 795 million is needed for non-controlling interest. This drained another HKD 2650 million off the current cash of HKD 3750 million. Based on current their position, unless there is a huge turnaround in cash from ops in the coming quarter to positively impact the cashflow and replenish shareholder's fund, I think I might have make a wrong move.

While TMS recently bought in at US$0.73, Capital Group dumped loads more at US$0.68.

Glad for any insights.

(recently vested but thinking hard now!)

Hi GPD, I am a fellow investor, and below is my tainted view, I might be wrong, and will be happy if other can point out my mistake.
[Image: structure12.jpg]

Looking at the trust structure, the income receive by trusts from its subsidaries are already net of its applicable taxes and expenses and principal repayment of shareholder loans,as such, I believe there are no "hidden" costs, what the trust report have capture the entities' liabilities.

as for:
"This translated to about HKD 1855 million in cash just for unitholders for the next payout. I assumed another HKD 795 million is needed for non-controlling interest. This drained another HKD 2650 million off the current cash of HKD 3750 million. "

I would think that for the trust to generate FCF after accounting for capex and minority interest of 2650HKD is rather a tall order. But they can further reduce capex, or increase gearing for capex. none of it is sustainable.

If we would assume the worst is here, and want sustainable payout from FCF net of Capex, Minority interest, interest and tax, my calculation gives 1.9 billion distribution per year without any accounting/ fiancial gimmicks.

The yield at my purchase price of 85 cents would then be only 3.9%

If you ask me, looking at the "guaranteed/safe" component, and working yield, I overpaid for it. But I can only hope the numbers will get better with the propose free trade zone at river delta area benefitting trade, and they can space out their capex more reasonable.

[Dividend Warrior]

I have divested HPH Trust.

[GPD]

Hi Greenrookie, all sensible discussions are valuable since I can gain insight to what I missed.

On that HKD2650, HPH will need to generate lesser than that as it should have already got part of it from Q3. From the last few quarters' report the distributed incomes have been:
FY2011 - HKD4,206 SDG678 (I am assuming SGD:HKD of 1:0.1613)
FY2012 - HKD6,421 SGD1,036
FY2013 (expecting) - HKD5,021 SGD810

Cash from ops as followed:
FY2011 - HKD5,533
FY2012 - HKD5,635
FY2013 (9mths) - HKD4,499

Assuming all other cash outflows are "billed" under the cash remained of the proceed from IPO and bank loan taken during 2011 and they pay unitholders and non-controlling interesting out from OCF, based on total OCF so far (from 2011), they have already got enough at this point to meet the guided full HKD40 cents DPU for FY2013. Any cash generated from Q4 can go to pay all other expenses or add to the net cash (frankly I still have absolutely zero idea how to determine that distribution income). They seems more committed to the guided DPU payout so capex can come from other sources.

A few other thoughts/questions:
- I am expecting that they are going to refinance that HKD30bil+ odd current loan in the coming quarter.
- There is an item called "Customer relationships" in the balance sheet and I wonder what that is?
- Is the income statement of any use other than offering depreciation info in this case?
- Also the high PE might be due to it being seems as a perpetual business?

Well the lifetime of this business might be till-the-end-of-the-world type and when the port operation increases due to recovering economy, more cash might be generated and the business might worth more that they paid for. They might keep it for more cash or dispose it at a premium or do any other things necessary to get more money out of it.

Based on $0.85, the half year yield is about 3.9% - 4%.

Beside the financial figures which are drawn from their quarter reports, the rest are all my personal view. Not a call to buy, hold or sell.

(still vested and thinking but not so hard now!)

[Drizzt]

I have divested HPH Trust.

why did you divest?

[Dividend Warrior]

I have divested HPH Trust.

why did you divest?

I found a better replacement in MLT.