The last time I blogged about HPH Trust was in August 2011 or almost two years ago. I was not really keen on the Trust primarily because I felt that the distribution yield was not high enough compared to the alternative investments available.
Now, I think all of us must have read or heard of the strike by port workers that is going on in Hong Kong. It has been going on for a month or so by now. There doesn't seem to be an end in sight.
I was told by a friend in Hong Kong that she sympathises with these workers because apparently their salaries are kept really low to help the port operations keep cost levels almost unchanged in the last 10 years! That is truly amazing.
I thought she could be exaggerating but reading the weekend edition of The Business Times this morning gave her account credence. Ideally, a raise of some meaningful magnitude has to be given.
The port workers are asking for a 20% increase in salary but have been offered only 7%. This explains the gridlock.
The strike is costing the port millions in losses every day and if the port were to give in to the request for a 20% increase in salary, unit holders of HPH Trust could see DPU reduce some 5 to 7%.
Honestly, if I were a unit holder of HPH Trust, I would vote to give these workers the raise they are asking for even if it means having less income distributions for myself. 10 years without a raise is pretty bad.
Then, the question of whether HPH Trust is a good investment comes to mind again. Why would Li Ka Shing spin off his port assets? He is a savvy businessman, an old ginger. If a business is very lucrative and growing, why would he list it?
Well, some might sell a fantastic asset because they need money but definitely not Li Ka Shing. So, why?
In the article today, it was reported that Hutchison's market share of Hong Kong port operations has grown to 53% by 2012 although container volume has been shrinking.
"The port has been in a slow decline despite the double digit growth in China's trade over the last decade; falling victim to competition from Chinese ports and Singapore. The fast-rising costs of living at home in recent years could worsen the crunch. Last year, total throughput volume decreased by 5.3% year on year."
The Business Times, 27 April 2013.
This seems like a business that is fiercely competitive and HPH was already losing out to competition even before the strike by port workers. Could things get any worse?
At US$1.01 a unit, the IPO of HPH Trust was definitely a good deal for the issuer.
Added (1 Feb 17):
http://www.hphtrust.com/distribution.html |
1. HPH Trust: Interim Financial Results.
2. HPH Trust: A weak debut.