HPH Trust FY23 earnings miss with full year DPU 9% below expectations – quick take
- FY23 earnings of HK$233m missed by 60% while full year DPU of HK 13.2cts was 9% lower than expected
- FY24 DPU guidance to be not less than FY23 DPU of HK 13.2cts, backed by a more constructive outlook on volumes
- Stock offers attractive yield of >11% that could reach as much as 20% if debt repayment program ends but no clear timeline on that for now; Maintain BUY, TP under review
2023 DPU misses by 9% at HK 13.2cts. HPH Trust reported FY23 earnings that missed our expectations by 60%, coming in at HK$233m (-79% y-o-y), as revenue declined by12.6% y-o-y to HK$11,730m (2% below our estimate). A final DPU of HK 7.7cts was declared, bringing full year DPU to HK 13.2cts, which was 9% lower than last year’s full year DPU of HK 14.5cts (and also lower than management’s guidance at half-time that DPU could be maintained at the same level as last year’s). The revenue decline of 12.6% was led by a 1% fall in throughput at Yantian and 15% decline in HK, as well as lower ancillary income. We think the earnings miss of 60% despite revenue just being 2% shy of our forecast was due to HK operations incurring deeper losses on a 15% decline in volumes from negative operating leverage.
Constructive outlook and attractive valuations. Looking ahead, management seems constructive on throughput growth for FY24 as China’s exports start to improve. Coupled with expectation of flat to a mild increase in ASPs, we should see revenues for the Trust rebounding in FY24. This has also led management to guide that FY24 DPU should be at least the same level as FY23’s ie HK 13.2cts. Meanwhile, it seems that the Trust will continue with its debt repayment program of HK$1bn a year though management did note that these cashflows would be available for distribution to shareholders as dividends once the board is comfortable with the Trust’s debt level (no mention of a target level). Currently, the stock is trading at just over 11% at current price levels based on HK 13.2cts, which is already quite attractive, it would yield closer to 20% should the Trust end its debt repayment program – though there is no immediate visibility of that. We continue to rate the stock a BUY, with TP under review as we look to revise our forecasts following FY23 results.
FY24 results at a glance
FY Dec (HK$m) | FY22 | FY23 | % chg y-o-y |
Sales | 12,166 | 10,636 | -12.6% |
Cost of Goods Sold | (4,175) | (3,625) | -13.2% |
Gross Profit | 7,992 | 7,011 | -12.3% |
Other Operating Income | 146 | 67 | -53.9% |
Staff Costs | (266) | (258) | -2.8% |
Depreciation & Amortization | (3,004) | (2,895) | -3.6% |
Others | (587) | (605) | 3.0% |
Total Operating Expenses | (3,857) | (3,758) | -2.6% |
EBIT | 4,281 | 3,320 | -22.4% |
Interest Expense | (673) | (872) | 29.5% |
Share of Associates’s and JV losses | (7) | (120) | 1693.3% |
Pretax Profit | 3,601 | 2,328 | -35.3% |
Tax | (1,081) | (847) | -21.7% |
Minority Interests | (1,421) | (1,248) | -12.2% |
Net Profit | 1,099 | 233 | -78.8% |