Stellar FY21 results and dividends
- FY21 net profit rose 110% y-o-y to HK$1,747m on exceptional storage income, above expectations
- Final dividend of HK8cts brings FY21 DPU to HK14.5cts, above our street high forecast of HK14cts
- FY22 core profit to stay resilient on continued high storage income; DPU guidance of HK14.5-15.5cts
- Maintain BUY with higher TP of US$0.37
Investment Thesis
Recommend BUY with a higher TP of US$0.37 on the back of strong FY21 earnings and a resilient outlook. HPHT’s strong performance in FY21 was mainly led by higher storage income, which we expect to partially continue into FY22F, as port congestions remain high. We’ve lifted our FY22F estimates by 25% on account of this and expect FY23F earnings to remain stable from FY22F on higher container handling rates and lower costs offsetting lower storage income.
Reaping the benefit of stringent cost management measures and debt repayment. We see HPHT’s earnings staying resilient in the next few years, despite throughput volume uncertainty in the near term and higher interest rates, as the trust has undertaken a series of cost management programmes to lower its cost base and has reduced its total debt by nearly HK$5bn in the last five years.
More upside to DPU guidance of HK14.5-15.5cts in FY22. With strong cash flow generation, resilient earnings, and a rapidly improving balance sheet, we believe there is room for HPHT to raise dividends further in the next few years. Stock is attractive at 7.9% prospective yield in our view.
Valuation:
Maintain BUY with a raised TP of US$0.37. Our discounted cash flow (DCF)-based TP assumes a weighted average cost of capital (WACC) of 8.0% (cost of equity 10.0%).
Where we differ:
We have the highest target price on the street, as we believe HPHT will see a sustained improvement in earnings and DPU.
Key Risks to Our View:
A global recession would materially impact trade and throughput numbers for HPHT, which would then have an impact on the trust’s earnings, cash flows, and dividends.