Hutchison Port Holdings Trust's growth hinges on shipping alliances amidst tough times

NPAT attributable to unitholders drops 18% YoY in 3Q.

The prospects of HK ports are relatively bleak within the next two to three years, with little earnings visibility and a dearth of potential catalysts for a strong throughput recovery. Nonetheless, Hutchison Port Holding Trust (HPHT) is expected to negotiate contracts with the shipping alliances in April 2017, said OCBC Investment Research.

"Given their ownership of 16 out of 24 contiguous berths in Kwai Tsing, which would allow for internal trucking, we believe HPHT would be in good stead to negotiate with alliances which seek to streamline terminal usage, thereby allowing HPHT to boost their throughput significantly," it said.

OCBC Investment Research notes that caveats include a potential offset by lower tariff rates offered to attract alliances, as well as any capacity constraints with HPHT’s HK utilization rate currently standing at ~75%.

HPHT's 3Q16 core NPAT attributable to unitholders decreased 18.2% to HK$430.2m on the back of a 7% drop in revenue, which was partially offset by an 11% drop in cost of services rendered following HPHT’s efficiency improvement programme.