Hutchison Port Holdings Trust

[GPD]

If DPU did drop to around 5%~6% next year, given the business prospect, its price might be depressed further. However, having said that, it is still a better yield than most blue chip which average to about 3%-4%. So unless the trade turned worse.

Two other things:
- proportion of payout to non-controlling interest has been interesting. 22% for 2011 and 31% for 2012. We will know the proportion for 2013 when Q1 results is out.
- the interest rates on their borrowing is quite low at about 2%.

Thing is, increasing costs and competition are certain, while rebound in trade is uncertain. So given the certainty of event pushing the price lower (or at best remain flat) and uncertainty of event pushing it up, I would prefer to stay out and monitor the situation first.

(still vested....)

[CityFarmer]

For those vested and interested...

HPHT sells 60% of Hong Kong terminal for S$404 million

HONG KONG – Singapore-listed Hutchison Port Holdings Trust has agreed to sell a 60 per cent stake in a Hong Kong terminal company for HK$2.47 billion (S$404 million), Bloomberg News reported on Thursday.

HPHT will sell a 40 per cent stake in Asia Container Terminals Holdings to Cosco Pacific and another 20 per cent to China Shipping Terminal Development (Hong Kong), it said in a regulatory filing with the Singapore Exchange.

The sale comes just a year after HPHT had bought the terminal operator for HK$3.2 billion to expand its capacity in Hong Kong. Workers at another terminal operator owned by HPHT went on a 40-day strike for more wages last May, leading some shipping lines to divert vessels to nearby ports in China.
http://www.todayonline.com/business/hpht...04-million

[greengiraffe]

Comments appreciated...

Not Vested
GG

RATIONALE FOR THE JV ALLIANCE
The establishment of the JV Alliance is an important and significant milestone achievement for
both HPH Trust and the Hong Kong container port industry as a whole in that (i) not only does it
yield a disposal gain of approximately HK$125 million (equivalent to approximately S$20 million)
for HPH Trust, (ii) by securing this collaborative and strategically beneficial relationship with both
COSCO Pacific and China Shipping, it allows all four berths located at the COSCO-HIT Terminals
and the Asia Container Terminals to be operated as one contiguous 1,380 metre long berth,
thereby enhancing Hong Kong’s position as a long term transshipment hub within the Pearl River
Delta region compensating for the stagnant growth in South China’s transshipment and export
volumes in 2013, (iii) servicing multiple mega vessels at this contiguous berth simultaneously is
now possible, and (iv) the operational flexibility, efficiencies, synergies, competitiveness, and
ultimately profitability of all relevant Hong Kong port operators are expected to be substantively
bolstered.

[Nick]

Comments appreciated...

Not Vested
GG

RATIONALE FOR THE JV ALLIANCE
The establishment of the JV Alliance is an important and significant milestone achievement for
both HPH Trust and the Hong Kong container port industry as a whole in that (i) not only does it
yield a disposal gain of approximately HK$125 million (equivalent to approximately S$20 million)
for HPH Trust, (ii) by securing this collaborative and strategically beneficial relationship with both
COSCO Pacific and China Shipping, it allows all four berths located at the COSCO-HIT Terminals
and the Asia Container Terminals to be operated as one contiguous 1,380 metre long berth,
thereby enhancing Hong Kong’s position as a long term transshipment hub within the Pearl River
Delta region compensating for the stagnant growth in South China’s transshipment and export
volumes in 2013, (iii) servicing multiple mega vessels at this contiguous berth simultaneously is
now possible, and (iv) the operational flexibility, efficiencies, synergies, competitiveness, and
ultimately profitability of all relevant Hong Kong port operators are expected to be substantively
bolstered.

Prob due to the operational efficiencies reaped here ?

[shanrui_91]

I think this is rather common for transhipment port. Unlike a gateway port, where the competition is much lesser, a transhipment port is more susceptible to loss of customer. With more ships preferring to call at Shenzhen or direct at Shanghai, Hong Kong has not been growing as a transhipment hub. Shanghai's total TEU has grown over the past 5 years after completion of various stages of yangshan port.

As container industry gets more concentrated, transhipment port is at a greater risk. One way to secure customer is by offering joint stake in the port terminal. A port terminal is often much more profitable than the containership. For e.g. in 2000, Port of Tanjung Pelepas in Malaysia snatched Maersk from Singapore by offering them a 30% stake. Since then, PSA has also offered joint stake in terminal with MSC and Cosco.

Cosco-HIT is already a JV between Cosco and HPHT. They are right beside each other too. As for operating efficiency, the length of a Triple E is 400m, so I am not too sure if it is that important to have a berth of 1,380m though efficiency of operation is a key driver of transhipment port. Currently, Modern Terminal and HIT have terminals with 3 continuous berths.

(not vested)

[GPD]

Question first: If HPHT now hold 40% of ACT, does it deconsolidate ACT from its financial reporting or just consolidate 40% of it?

60% of HK$3.2billion is HK$1.92 billion. The differences between this and HK$2.47billion is HK$0.55 billion. How it ended up only as HK$125 million? [Post: Ok they actually paid off ACT's debt amounted to HK$750million during the acquisition.]

So there is a one-off gain of HK$125 million which isn't alot to speak in the next Q but reduced(or loss) of earning from ACT thereafter.

------------------------------------------------------------------------------------------------------
GAINS ON THE DISPOSAL AND USE OF PROCEEDS

The HPH Trust group realised a net gain (being the value of the Disposal proceeds in excess of
the book value) of approximately HK$125 million (equivalent to approximately S$20 million) and
received net proceeds of approximately HK$2,472 million (equivalent to approximately S$403
million) at Completion. The Trustee-Manager intends to use such proceeds for working capital
purposes and in funding the HPH Trust group’s future operations and capital expenditure as and
when they arise.
------------------------------------------------------------------------------------------------------

I guess this gives them the much needed boost to their cashflow in the short-term which they really need but they are not paying off any of the loan taken to acquire ACT.

My conclusions from this event:
- one-off boost to next Q EPS but reduced EPS after next Q.
- no reduction in interest expenses.
- pray and hope the synergy can results in more revenue.

I suppose as long as they can keep their cashflow above water, the story can still go on...

(no longer vested)

[sykn]

I agree with you that the arithmetics don't add up. I hate it when they insult our intelligence by putting out this kind of announcements where the numbers don't match, and when they gloat over their ability to skirt around the listing rules to avoid seeking shareholders' approval of the transaction.

[greengiraffe]

http://www.todayonline.com/business/hph-...ns-improve

HPH Trust revives expansion plan as global conditions improve

Trust posts 47% Q1 profit, aims to add one berth each year from 2015 to its port in Shenzhen
PUBLISHED: APRIL 29, 4:12 AM
SINGAPORE — Hutchison Port Holdings Trust (HPH Trust), which posted its first profit increase in five quarters yesterday, is looking to revive a previously-shelved expansion plan as soon as next year, banking on renewed demand for Chinese goods from countries such as the United States and Europe.

HPH Trust aims to add one berth each year from 2015 to its Yantian port in Shenzhen, said Mr Gerry Yim, Chief Executive of Hutchison Port Holdings Management, the manager of the trust. The expansion plan was initially scheduled to begin in 2010 but was postponed as the overall market saw slower growth back then, said Mr Yim.

The expansion is estimated to cost HK$4.5 billion (S$728.9 million).

“That’s the current plan, but if the market is not so good, we’ll push it further,” said Mr Yim. “We have done most of the work, such as land formation, infrastructure; what we have not done is (adding) all of the cranes and finishing of the top surface, putting all these final touches to it.”

Chief Financial Officer Ivor Chow added: “There could also be a scenario where growth accelerates and we have to move (the expansion) forward, so we have to be flexible when it comes to that.”

Backed by Mr Li Ka-shing, Asia’s richest man, HPH Trust said yesterday first-quarter net profit surged 47 per cent on-year to HK$558.9 million. This is the first time it has posted an increase in quarterly profit since the final three months of 2012. Earnings per share also rose 46.9 per cent to 6.42 HK cents.

The shipping industry has struggled with overcapacity and rising fuel prices in the past few years amid a slowdown in global trade.

To tackle this, the world’s largest shipping lines — Maersk Line, the Mediterranean Shipping Company and CMA CGM — agreed last year to forge an operational alliance to better manage capacity and costs on East-West trades. Called the P3 Network, the alliance will see the three firms combine their resources, allowing them to operate larger vessels, among other co-operation.

Said Mr Yim: “We are fully supportive of that because … if you don’t have to berth so many times — one big ship instead of two smaller ones — then you have more volume per ship. That’s more efficient for us and better for them as well.”

He added that the company is expecting its ports in Hong Kong and Shenzhen to handle 5 per cent more container throughput this year, despite concerns over a slowdown in China’s economy.

“The nature of our business is we’re not tied to the gross domestic product of China. We’re tied to the exporting trade of China … (and) that very much depends on the demand from the end-markets in US and Europe. (Even) if the China economy slows down, cost inflation may well be more manageable, so this is not necessarily a bad thing for us.”

[sykn]

FINALLY! For those of us who've been faithfully hanging on to the shares of HPH for the last couple of years...... I'm now in HK on holiday, and as I see from my taxi the port area, glad to say that I own a little bit of the action over there. This is what value investing is all about.

[sykn]

Lastest development - China banned P3 alliance... Got this from somewhere...

Asian ports are still digesting the ramifications of China’s unexpected decision yesterday to reject the P3 Network application, putting the kibosh on a vessel-sharing agreement between Maersk Line, MSC and CMA CGM that was set to dominate the container shipping industry. Most terminal executives declined to comment while they searched for more details, but all expressed surprise that approval from the Ministry of Commerce (Mofcom) had been denied. But it was a welcome surprise to staff at some terminal operators who learned of the rejection from the JOC. “That is great news,” said a member of the management staff at one terminal operator. “The lines will have less bargaining power and will not be able to force our rates down.” Staff at another terminal also welcomed the decision that forced the carriers to scrap the alliance, saying some P3 ports of call in Asia stood to lose services when the carriers consolidated their routes. Now that the alliance is history, potential volume losses will have to be dealt with by ports in Asia, said an executive at a large port operator who declined to be named. He said terminal operators will need to understand how the three lines plan to deploy their vessels now that the P3 has been abandoned, and with a pooled fleet of 255 vessels, the rerouting may require a fair amount of creativity. “Depending on their routing of services, some terminals may gain more volume while others may lose some. It may take some months before the situation is clear,” he said.

Looks like the jury is still out as to whether it is beneficial or threatening to HPHT as breaking the corroboration of the big shipping lines will deny them muscle to negotiate the rates down, but this is counterbalanced by potential volume losses as P3 is more efficient for optimising the cargo.