Singapore Slings

04/28/2017 2:49 am EST


Adrian Day

Chairman and CEO, Adrian Day Asset Management

For more sophisticated traders and investors who are comfortable buying on global exchanges, Adrian Day — editor of Global Analyst — looks at a pair of Singapore-listed ideas.

Hutchison Port Holdings Trust (Singapore: HPHT) reported a 15% decline in profits on a 6% decline in throughput for 2016, in line with expectations. But the company lowered dividend guidance for this year, for an implied yield of 7.5%.

The trust is under pressure from macro issues, including shipping alliance rationalization leading to pricing pressures, sluggish global trade, and pressures on the Hong Kong port, as well as the trust’s debt repayment plans.

However, given the outlook for steady revenues and dividends over the next few years as well as upside potential if global trade recovers, we are holding for a likely bottom-of- the-cycle 7.5% yield. We would add on improved prospects or lower stock price.

Kingsmen Creatives (Singapore: KMEN) had a difficult 40th year in the face of a soft retail environment and much lower revenue from the volatile exhibitions and museums sector.

Overall, though revenues were up slightly, profits fell 9% in 2016, with depreciation (on its office building purchase) up significantly. The dividend was reduced from last year, to a current 4.2%.

Kingsmen is a well-run, growing company with a strong balance sheet. The market is turning, we believe, so we may see the dividend start to grow again this year. Despite disappointing earnings, perhaps there is a turn ahead. We are holding, and buying on stock price weakness.

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