Company Guide Hutchison Port Holdings Trust

Version 4 | Bloomberg: HPHT SP | Reuters: HPHT.SI Refer to important disclosures at the end of this report

DBS Group Research . Equity 28 Jul 2016

BUY Down but not out Last Traded Price: US$0.485 (STI : 2,941.49) Defensive yield play. Hutchison Port Holdings Trust (HPHT) Price Target : US$0.56 (15% upside) (Prev US$0.57) offers investors an attractive 8% yield, supported by cash flow generated from its port operations in Shenzhen and Hong Potential Catalyst: Recovery in throughput volumes Kong, where it has a leading market share. While a planned Where we differ: In line debt repayment programme from 2017F onwards could cap DPU growth in the medium term, a rebound in trade volumes Analyst Paul YONG CFA +65 6682 3712 [email protected] and throughput as well as a stronger balance sheet thereafter

Singapore Research Team should support longer-term expansion.

Still a weak quarter, but an improvement vs 1Q16. Overall What’s New throughput numbers continue to be dragged by weak transshipment volumes, falling 7% y-o-y. Despite this, HPHT  2q16 revenue fell more than expected as was still able to deliver an improvement in performance q-o-q, throughput volumes disappointed, dropping 7% mainly on successful execution of planned tariff increases and  Core net profit of HK$541m (-21% y-o-y) in 1H16 as ongoing efficiency initiatives bear fruit.

helped by efficiency gains of c.10% - largely in line Lowering earnings for FY16F/FY17F modestly by 1.6%/0.8%  DPU forecast of 30 HK cts for FY16F is intact but DPU forecast of 30 HK cts is intact. We have lowered our throughput growth assumptions for FY16/17F and thus trim  Maintain BUY, TP lowered slightly to US$0.56 our FY16F and FY17F core profit forecasts by 2.0% and 0.8% respectively. Meanwhile, DPU forecast of 30 HK cts remains unchanged. Price Relative

US$ Relative Index Debt repayment plan explained. HPHT disclosed that it will 0.9 212 look to repay a minimum of HK$1bn of debt annually 0.9 0.8 192 beginning from 2017 to lower its gearing level and improve its 0.8 172 interest coverage ratios in a rising interest rate 0.7 152 0.7 132 environment. Including mandatory amortisation of term loans 0.6 112 0.6 and contributions from non-controlling interests on debt 92 0.5 0.5 72 repayment, we estimate this would result in a HK$300-350m 0.4 52 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 use of cash per annum that could potentially lower distributable income by 11-13%, assuming earnings and cash Hutchison Port Holdings Trust (LHS) Relative STI INDEX (RHS) flow do not improve significantly beyond 2017F. Forecasts and Valuation FY Dec (HK$ m) 2014A 2015A 2016F 2017F Valuation: Revenue 12,622 12,613 12,149 12,639 15% potential upside to TP of US$0.56 and 8% yield is EBITDA 6,860 7,315 6,998 7,295 attractive as a defensive play. Our TP is based on a discounted Pre-tax Profit (15,287) 3,870 3,776 3,586 cash flow valuation framework (weighted average cost of Net Profit (17,192) 1,745 1,799 1,531 Net Pft (Pre Ex.) 1,564 1,745 1,442 1,531 capital of 7% and terminal growth rate of 0%). DPU is Net Pft Gth (Pre-ex) (%) (6.6) 11.6 (17.3) 6.2 projected to be lower at c. 30 HK cts in FY16F from 34.4 HK EPS (US cts.) (25.4) 2.58 2.66 2.27 cts in FY15, but still offers an attractive yield of c. 8%. EPS Pre Ex. (US cts.) 2.31 2.58 2.13 2.27 EPS Gth Pre Ex (%) (7) 12 (17) 6 Key Risks to Our View: Diluted EPS (US cts.) (25.4) 2.58 2.66 2.27 A global recession would materially impact trade and Net DPS (US cts.) 5.29 4.43 3.87 3.87 throughput numbers for HPHT, which would then have an BV Per Share (US cts.) 65.6 63.0 61.8 60.2 impact on the group’s earnings and cash flows, and ultimately PE (X) nm 18.8 18.2 21.4 dividend payout. PE Pre Ex. (X) 21.0 18.8 22.7 21.4 P/Cash Flow (X) 6.1 6.6 6.4 6.0

EV/EBITDA (X) 11.3 10.7 11.3 10.9 At A Glance Net Div Yield (%) 10.9 9.1 8.0 8.0 Issued Capital (m shrs) 8,711 P/Book Value (X) 0.7 0.8 0.8 0.8 Mkt. Cap (US$m/US$m) 4,225 / 4,225 Net Debt/Equity (X) 0.4 0.4 0.4 0.5 Major Shareholders (%) ROAE (%) (31.4) 4.0 4.3 3.7 Hutchison Port Hldgs Ltd 27.6 Earnin gs Rev (%): (2) (1) Temasek Holdings Private Ltd 11.0 Consensus EPS (US cts.): 2.40 2.20 Free Float (%) 61.4 Other Broker Recs: B: 2 S: 2 H: 6 3m Avg. Daily Val (US$m) 6.9 Source of all data on this page: Company, DBS Bank, ICB Industry : Financials / Equity Investment Instruments Bloomberg Finance L.P

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Hutchison Port Holdings Trust

WHAT’S NEW 2016 but reiterated their full year DPU guidance of 30-32 HK 2Q numbers still weak but looking slightly better vs 1Q cts for 2016. HPHT declared an interim distribution of 14 HK cts (-11% y-o- Core net profit largely in line. HPHT’s 2Q revenue of y), which will trade ex-dividend on 2nd Aug. HK$2,938 fell more than expected as throughput growth of -

7% was below our expectations. Excluding the rent and rates Minor adjustments to forecasts, but no change to DPU refund of HK$357m announced in 1Q16, core net profit of forecast of 30 HK cts. We lower our revenue projections for HK$541m in 1H16 represents a y-o-y decline of c.21%. This FY16F/17F slightly by 2.6%/3.0% as we revise throughput is largely in line with our earlier assumption of 16% decline growth and ASP assumptions downward to reflect 1) weaker for FY16F, which assumes a comparatively better second half volumes year-to-date (YTD), and 2) the group’s ability to push for 2016. through tariff hikes of a similar scale ahead (relative to those

achieved over the last two years) given the prolonged Generally better q-o-q despite fall in overall throughput subdued operating environment for liners. numbers. The group posted a 7% decline in overall

throughput (11% and 1% throughput decline in However, impact on earnings is modest (-1.6%/-0.8% for and Yantian, respectively) as volumes were largely dragged by FY16F/17F) as we also cut our cost and interest expense weaker intra- and transshipment cargoes. assumptions, given 1) efficiency gains from ongoing cost

Despite this, HPHT was still able to deliver a better reduction initiatives, and 2) expected delay in rate hikes by performance q-o-q, mainly from tariff increases and as the Fed. ongoing efficiency initiatives bear fruit. As such, our DCF-based TP is lowered slightly to US$0.56

(from US$0.57 previously) but our DPU forecast of 30 HK cts Soft global trade outlook but management maintains full year remains intact. DPU guidance of 30–32 HK cts. Given the soft global trade outlook, management remains cautious on cargo volumes for

Quarterly / Interim Income Statement (HK$m) FY Dec 2Q2015 1Q2016 2Q2016 % chg yoy % chg qoq

Revenue 3,128 2,752 2,938 (6.1) 6.8 Cost of Goods Sold (1,157) (1,041) (1,037) (10.4) (0.4) Gross Profit 1,971 1,711 1,901 (3.5) 11.1 Other Oper. (Exp)/Inc (966) (558) (965) (0.1) 72.9 Operating Profit 1,005 1,153 937 (6.8) (18.8) Other Non Opg (Exp)/Inc 0.32 0.0 0.0 nm nm Associates & JV Inc 41.8 17.1 27.2 (34.9) 59.1 Net Interest (Exp)/Inc (159) (169) (178) (11.5) (5.3) Exceptional Gain/(Loss) 0.0 0.0 0.0 Pre-tax Profit 888 1,002 786 (11.4) (21.5) Tax (192) (207) (156) (19.0) (24.9) Minority Interest (295) (239) (288) (2.5) 20.2 Net Profit 400 555 343 (14.4) (38.2) Net profit bef Except. 400 555 343 (14.4) (38.2) EBITDA 1,747 1,893 1,691 (3.2) (10.7)

Margins (%) Gross Margins 63.0 62.2 64.7 Opg Profit Margins 32.1 41.9 31.9 Net Profit Margins 12.8 20.2 11.7

Source of all data: Company, DBS Bank

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Page 2 Company Guide Hutchison Port Holdings Trust

HIT Throughput ('000 TEUs) CRITICAL DATA POINTS TO WATCH 9,824 9,922 9,538 8,933 Earnings Drivers: 8,505 8,040 8,281 Recovery in export outlook for key markets. The volume of 7,087 containers handled by HPHT is materially affected by the 5,670 economic performance of the US and . Outward bound 4,252 cargoes to the US have shown an encouraging upward trend in 2,835 2015 and are likely to continue on a mild recovery path in 2016. 1,417 Outward cargoes to Europe which were soft in 2015 as 0 shipping lines struggled on the Asia-European trade finally 2013A 2014A 2015A 2016F 2017F showed signs of bottoming, as exports out of Yantian to Europe grew 5% in 2Q16. While this development should be positive Yantian Throughput ('000 TEUs)

12,166 12,166 12,531 for Yantian in the longer term, we expect volume towards 11,673 Europe to remain flat in 2016, given the weak consumer 10,796 10,225 sentiment and high unemployment rate. 7,669 Hong Kong continues to face mild throughput decline on lower 5,113 transshipment volumes HIT posted a decline of 10.4% in throughput handled in 2Q16, mainly on lower Intra-Asia and 2,556 transshipment cargoes. This trend is likely to persist in the near- 0 term due to volume pressure from the ongoing rationalisation 2013A 2014A 2015A 2016F 2017F and restructuring of various global shipping alliances, as seen HIT Tariff / TEU over the past few quarters. 598 586 570 576 582 542 But better ASP and cost control should help maintain margins. 478 Due to recent tariff increases and a better volume mix on lower transshipment and empty box volumes, ASPs are expected to 359 improve slightly. Furthermore, better rationalisation of services 239 among shipping alliance members - expected to be completed in 2H16 - should also help to reduce costs and protect the 120 margins at Hong Kong terminals. 0 2013A 2014A 2015A 2016F 2017F Yantian expansion for future growth. The construction of three Yantian Tariff / TEU additional deep-water berths at Yantian’s West Port starting 629 625 624 from 2015 should support growth in Yantian’s throughput of 618 618

9.4% from 11.7m TEUs in 2014 to c. 12.8m TEUs in 2017F by 508 adding c. 3m TEUs in capacity. 381 Yantian should continue to see modest growth on mega vessel 254 trends and higher transshipment boxes. Despite near-term 127 pressure and a double-digit decline in transshipment volumes (which currently represents c.13% of Yantian’s volumes), 0 Yantian Port was able to maintain flat throughput growth in 2013A 2014A 2015A 2016F 2017F 2Q16. With the trend towards mega vessels also continuing Operating Margin (%) unabated as liners continue to look to reduce slot costs, we 0.35 0.35 0.33 0.34 expect volume growth at Yantian to be flat in 2016. 0.32 0.31

0.28 Successfully implemented tariff hike of c.2% for Yantian, but RMB depreciation to keep ASP flat in 2016. In 1H16, Yantian 0.21 was able to successfully push through a modest rate hike of 0.14 about 2%, but YTD depreciation of RMB would mean the 0.07 average tariff remains flat for the year. 0.00 2013A 2014A 2015A 2016F 2017F Source: Company, DBS Bank

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Page 3 Company Guide

Hutchison Port Holdings Trust

Leverage & Asset Turnover (x) Balance Sheet: 0.2 Debt servicing ratio remains firm despite higher net gearing. As 0.60 0.2 0.2 HPHT progresses with its capital expenditure plans, we expect 0.50 its net gearing to rise from 0.6x in 2015 to 0.7x by 2017F. 0.1 0.40 0.1 However, gross debt-to-EBITDA should decline from 4.6x in 0.1 0.30 2015 to 4.5x in 2017F, as the Trust kick starts its 5-year debt 0.1 repayment programme in 2017. 0.20 0.1 0.0 0.10 0.0 FY16F and FY17F distributions largely intact. Given the buffer 0.00 0.0 afforded by the HK$357m net gain on receipt of a government 2013A 2014A 2015A 2016F 2017F Gross Debt to Equity (LHS) Asset Turnover (RHS) rent and rates refund which HPHT can tap into, we believe that FY16F and FY17F distributions are likely to remain fairly intact. Capital Expenditure HK$m 5,000.0 Debt repayment programme. HPHT disclosed that it will look to 4,500.0 4,000.0 repay a minimum of HK$1bn of debt annually beginning from 3,500.0 2017 to lower its gearing level and improve its interest coverage 3,000.0 2,500.0 ratios in a rising interest rate environment. Including mandatory 2,000.0 amortisation of term loans and contributions from non- 1,500.0 1,000.0 controlling interests on debt repayment, we estimate this would 500.0 result in a HK$300-350m use of cash per annum that could 0.0 2013A 2014A 2015A 2016F 2017F potentially lower distributable income by 11-13%, assuming Capital Expenditure (-) earnings and cash flow do not improve significantly beyond 2017F. ROE (%) 4.0%

3.5%

Share Price Drivers: 3.0% Strong South export growth. With market shares of c. 2.5% 70% and c. 57% in Hong Kong and across the entire Pearl River 2.0% Delta region respectively, HPHT would be the prime beneficiary 1.5% to a potential recovery of South China exports. A sharp rise in 1.0% manufacturing activity (reflected in future PMI data) could thus 0.5% lift its share price. 0.0% 2013A 2014A 2015A 2016F 2017F Key Risks: Forward PE Band (x) Transshipment cargoes open to competition. About 60% of (x)

Hong Kong Port volumes are transshipment cargoes, which are 36.9 subject to competition from other regional ports like +2sd: 35.2x

Singapore, Shanghai, and . Hence, pricing for 31.9 +1sd: 31.5x transshipment cargoes is likely to be continuously under Avg: 27.8x pressure. 26.9 ‐1sd: 24x 21.9 Exposed to higher interest rates. If interest rates rise beyond ‐2sd: 20.3x our assumed average increase of 20bps for 2016, it would lead 16.9 to lower-than-expected earnings, cash flow and thus dividends Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 for HPH Trust. PB Band (x)

1.3 (x)

Company Background 1.2 Hutchison Port Holdings Trust (HPHT) has controlling interests 1.1 +2sd: 1.07x in container port assets located in two of the world's busiest 1.0 +1sd: 0.96x container port cities by throughput - Kwai Tsing, Hong Kong 0.9 and Yantian Port, Shenzhen, China. Avg: 0.84x 0.8 0.7 ‐1sd: 0.73x

0.6 ‐2sd: 0.61x

0.5 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Source: Company, DBS Bank

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Page 4 Company Guide Hutchison Port Holdings Trust

Key Assumptions FY Dec 2013A 2014A 2015A 2016F 2017F

HIT Throughput ('000 9,538 9,824 8,933 8,040 8,281 Yantian Throughput ('000 10,796 11,673 12,166 12,166 12,531 We lower our HIT Tariff / TEU 586 542 570 576 582 throughput assumptions Yantian Tariff / TEU 629 625 618 618 624 by 2-4% for HIT and Operating Margin (%) 0.32 0.31 0.35 0.33 0.34 Yantian in FY16F and FY17F respectively, Segmental Breakdown FY Dec 2013A 2014A 2015A 2016F 2017F

Revenues (HK$m) HK 5,590 5,327 5,093 4,630 4,816 PRC 6,794 7,295 7,520 7,520 7,823 Other Income 0.0 0.0 0.0 0.0 0.0 Total 12,384 12,622 12,613 12,149 12,639

Income Statement (HK$m) FY Dec 2013A 2014A 2015A 2016F 2017F

Revenue 12,384 12,622 12,613 12,149 12,639 Cost of Goods Sold (4,494) (4,814) (4,575) (4,250) (4,421) HIT’s rent and rates refund on certain leased Gross Profit 7,890 7,808 8,038 7,899 8,218 properties. Other Opng (Exp)/Inc (3,958) (3,892) (3,685) (3,889) (3,945) Operating Profit 3,932 3,916 4,353 4,011 4,273 Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0 Associates & JV Inc 121 139 141 98.7 102 Net Interest (Exp)/Inc (641) (586) (624) (690) (789) Exceptional Gain/(Loss) 0.0 (18,756) 0.0 357 0.0 Pre-tax Profit 3,411 (15,287) 3,870 3,776 3,586 Tax (409) (731) (825) (797) (801) Minority Interest (1,327) (1,174) (1,300) (1,180) (1,253) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 1,675 (17,192) 1,745 1,799 1,531 Net Profit before Except. 1,675 1,564 1,745 1,442 1,531 EBITDA 6,906 6,860 7,315 6,998 7,295 Growth Revenue Gth (%) (0.3) 1.9 (0.1) (3.7) 4.0 EBITDA Gth (%) (5.6) (0.7) 6.6 (4.3) 4.2 Opg Profit Gth (%) (10.6) (0.4) 11.1 (7.9) 6.5 Net Profit Gth (Pre-ex) (%) (26.8) (6.6) 11.6 (17.3) 6.2 Margins & Ratio Gross Margins (%) 63.7 61.9 63.7 65.0 65.0 Opg Profit Margin (%) 31.7 31.0 34.5 33.0 33.8 Net Profit Margin (%) 13.5 (136.2) 13.8 14.8 12.1 ROAE (%) 2.5 (31.4) 4.0 4.3 3.7 ROA (%) 1.2 (13.6) 1.5 1.6 1.4 ROCE (%) 2.7 3.3 3.2 3.0 3.2 Div Payout Ratio (%) 213.3 N/A 171.7 145.2 170.7 Net Interest Cover (x) 6.1 6.7 7.0 5.8 5.4 Source: Company, DBS Bank

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Hutchison Port Holdings Trust

Quarterly / Interim Income Statement (HK$m) FY Dec 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016

Revenue 3,128 3,502 3,035 2,752 2,938 Cost of Goods Sold (1,157) (1,211) (1,050) (1,041) (1,037) Gross Profit 1,971 2,291 1,985 1,711 1,901 Other Oper. (Exp)/Inc (966) (961) (790) (558) (965) Lower costs as efficiency Operating Profit 1,005 1,329 1,195 1,153 937 initiatives bear fruit. Other Non Opg (Exp)/Inc 0.32 0.0 0.0 0.0 0.0 Associates & JV Inc 41.8 34.8 33.2 17.1 27.2 Net Interest (Exp)/Inc (159) (153) (157) (169) (178) Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0 Pre-tax Profit 888 1,211 1,072 1,002 786 Tax (192) (263) (211) (207) (156) Minority Interest (295) (423) (327) (239) (288) Net Profit 400 526 533 555 343 Net profit bef Except. 400 526 533 555 343 EBITDA 1,747 2,071 1,945 1,893 1,691

Growth Revenue Gth (%) 6.1 12.0 (13.3) (9.3) 6.8 EBITDA Gth (%) 12.4 18.6 (6.1) (2.7) (10.7) Opg Profit Gth (%) 22.1 32.3 (10.1) (3.5) (18.8) Net Profit Gth (Pre-ex) (%) 40.0 31.4 1.4 4.1 (38.2) Margins Gross Margins (%) 63.0 65.4 65.4 62.2 64.7 Opg Profit Margins (%) 32.1 38.0 39.4 41.9 31.9 Net Profit Margins (%) 12.8 15.0 17.6 20.2 11.7

Balance Sheet (HK$m) FY Dec 2013A 2014A 2015A 2016F 2017F

Net Fixed Assets 74,550 69,927 68,717 68,128 67,208 Invts in Associates & JVs 2,667 4,305 4,060 4,059 4,060 Other LT Assets 50,868 30,628 30,766 30,766 30,766 Cash & ST Invts 5,819 7,799 6,841 5,660 4,119 Inventory 161 134 124 115 119 Debtors 3,101 3,318 3,723 3,587 3,731 Other Current Assets 0.0 0.0 0.0 0.0 0.0 Total Assets 137,166 116,110 114,231 112,315 110,004

ST Debt 10,799 8,190 8,911 8,911 8,911 Creditor 6,582 6,941 7,295 6,520 6,541 Other Current Liab 238 487 313 313 313 LT Debt 22,999 25,491 24,082 24,082 23,082 Other LT Liabilities 12,315 11,607 11,462 11,462 11,462 Shareholder’s Equity 65,169 44,316 42,600 41,779 40,695 Minority Interests 19,063 19,078 19,568 19,248 19,000 Total Cap. & Liab. 137,166 116,110 114,231 112,315 110,004

Non-Cash Wkg. Capital (3,558) (3,976) (3,761) (3,132) (3,003) Net Cash/(Debt) (27,980) (25,883) (26,153) (27,333) (27,874) Debtors Turn (avg days) 90.2 92.8 101.9 109.8 105.7 Creditors Turn (avg days) 1,590.0 1,228.5 1,481.3 1,851.9 1,587.9 Inventory Turn (avg days) 32.6 26.7 26.8 31.9 28.5 Asset Turnover (x) 0.1 0.1 0.1 0.1 0.1 Current Ratio (x) 0.5 0.7 0.6 0.6 0.5 Quick Ratio (x) 0.5 0.7 0.6 0.6 0.5 Net Debt/Equity (X) 0.3 0.4 0.4 0.4 0.5 Net Debt/Equity ex MI (X) 0.4 0.6 0.6 0.7 0.7 Capex to Debt (%) 13.5 3.3 6.2 7.0 6.3 Z-Score (X) 0.4 0.2 0.2 0.2 0.2 Source: Company, DBS Bank

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Page 6 Company Guide Hutchison Port Holdings Trust

Cash Flow Statement (HK$m) FY Dec 2013A 2014A 2015A 2016F 2017F

Pre-Tax Profit 3,411 (15,287) 3,870 3,776 3,586 Dep. & Amort. 2,854 2,805 2,821 2,888 2,920 Tax Paid (580) (761) (1,226) (797) (801) Assoc. & JV Inc/(loss) (121) (139) (141) (98.7) (102) Chg in Wkg.Cap. (1,238) 169 (40.9) (629) (129) Other Operating CF 829 18,610 (298) 0.0 0.0 Net Operating CF 5,155 5,397 4,985 5,140 5,474 Capital Exp.(net) (4,574) (1,106) (2,042) (2,300) (2,000) Other Invts.(net) 0.0 0.0 0.0 0.0 0.0 Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 Div from Assoc & JV 144 142 138 100 100 Other Investing CF 136 2,560 711 0.0 0.0 Net Investing CF (4,294) 1,596 (1,194) (2,200) (1,900) Div Paid (3,997) (3,572) (3,310) (2,621) (2,615) Chg in Gross Debt 4,647 (173) (629) 0.0 (1,000) Capital Issues 119 0.0 0.0 0.0 0.0 Other Financing CF (1,980) (1,268) (810) (1,500) (1,500) Net Financing CF (1,211) (5,013) (4,749) (4,121) (5,115) Currency Adjustments 0.0 0.0 0.0 0.0 0.0 Chg in Cash (350) 1,980 (958) (1,180) (1,541) Opg CFPS (US cts.) 9.46 7.74 7.44 8.54 8.29 Free CFPS (US cts.) 0.86 6.35 4.36 4.20 5.14 Source: Company, DBS Bank

Target Price & Ratings History

0.64 US$ Closing Target S.No. Date Rating Price Price 0.59 1: 31 Aug 15 0.53 0.62 BUY 2 2: 23 Sep 15 0.57 0.62 BUY 3: 26 Oct 15 0.57 0.63 BUY 0.54 3 4: 04 Feb 16 0.46 0.61 BUY 5: 19 Apr 16 0.47 0.57 BUY

1 0.49 4

0.44 5

0.39 Jul-15 Nov-15 Mar-16 Jul-16 Note : Share price and Target price are adjusted for corporate actions.

Source: DBS Bank

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Page 7 Company Guide

Hutchison Port Holdings Trust

DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 28 Jul 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

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Page 8 Company Guide Hutchison Port Holdings Trust

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have a proprietary position in Hutchison Port Holdings Trust recommended in this report as of 30 Jun 2016.

2. DBS Bank Ltd does not market make in equity securities of the issuer(s) or company(ies) mentioned in this Research Report.

3. Compensation for investment banking services: DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission and/or by DBS Bank (Hong Kong) Limited which is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission. Where this publication relates to a research report, unless otherwise stated in the research report(s), DBS Bank (Hong Kong) Limited is not the issuer of the research report(s). This publication including any research report(s) is/are distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS Bank (Hong Kong) Limited. This report is intended for distribution in Hong Kong only to professional investors (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and any rules promulgated thereunder.)

Indonesia This report is being distributed in by PT DBS Vickers Securities Indonesia.

Malaysia This report is distributed in by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United Kingdom This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

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Hutchison Port Holdings Trust

Dubai This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other jurisdictions In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

DBS Bank Ltd 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888 e-mail: [email protected] Company Regn. No. 196800306E

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