HPH Trust posed for rise

Hutchison Port Trust (NS8U.SG) has been trading below it IPO debut price of US$1.01 ever since it was first listed in the Singapore Exchange Main board. Being listed almost immediately after the Japan Earthquake gave the counter a bad start.A weak US dollar coupled with general weakness in global equities has seen the stock hovering in the range of US$0.55- US$0.85.

On 7 March 2013, Hutchison Port Holdings Trust (HPH Trust) announced its acquisition of Asia Container Terminals (ACT) for a cash consideration of approx. HKD3.2bil. HPH Trust also procured an amount of HKD750mil to fund the full repayment of ACT’s existing indebtedness. ACT owns and operates Container Terminal 8 West (CT8W), which has two berths located in Kwai Chung, Hong Kong and has a concession lease that runs till 30 June 2047.

Supported by the strategic positives of massive operational scale, long contiguous berths as well as the relatively resilient nature of its throughput mix, HPH Trust remains favourably positioned to ride on the burgeoning intra‐ Asia and transhipment trade in the coming years. Therefore, I continue to believe that the current degree of undervaluation in HPH Trust remains unjustified.

There have also been rumours circulating that HPH Trust is likely to replace Fraser & Neave(F & N) in the STI index. F & N has been taken over by Thai Beverage and it was announced after the STI review that it will take the place of IHH holdings with effect from 18 March. At the moment HPH is one of the 5 counters on the STI reserve list and the largest by market capitalization. Should the rumors be proven true, it will mean very likely that HPH holdings will experience a large buying demand in its share as many mutual funds tracking the Straits Times Index will be buying up the counter. We are already seeing increases in the price of the counter and the highest transaction turnover for HPH for the past 12 months where 89.6 million shares of HPH trust changing hands. We do not know if it is mutual funds manager stocking up the shares before the price goes up further or a clearer signal that it will be included in the STI come next review.

The future of HPH trust certainly looks bright and I would recommend it as part of your dividend basket of shares.

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