Company Update - Tianjin Port Development Holdings (3382.hk)

Acquisition of oil terminal by TPC in line with expectation.

What's changed?
Tianjin Port Co (TPC), 56.8% owned subsidiary of Tianjin Port Development (TPD) has announced,
(1) it will acquire 50% stake in crude oil handling project company, Tianjin Port Shihua, for a consideration of RMB329.6mn. With designed handling capacity of 20 tonnes, the terminal mainly serves Sinopec's 1mn tonne ethylene project in Tianjin (with Saudi Basic Industries Corporation, break ground for construction on 26 June 2006) and other petrochemical plants in Hebei.
(2) 2010 net profit for TPC increased 25% yoy to RMB803mn, implying an attributable profit of RMB456mn to TPD.

Implications
(1) the acquisition of the oil terminal has been widely expected by the market and is inline with our expectation that oil will emerge as the major driver for TPD. 2011E earnings and NAV enhancement is estimated to be 3.4% and 2.6%.
(2) TPC is estimated to contribute 80% of the earnings of TPD. Thus, limited upside risk for TPD's result on 28 March.
(3)In 2011, we have still seen weak iron ore and coal throughput data for Tianjin Port recently. Iron ore unloading volume in Tianjin Port declined 16% yoy in Jan 2011 while the whole industry grew 33%. Coal shipments from Tianjin Port registered 6.8% yoy growth in 2M11, which is slower than the 12.2% for Qinghuangdao and 21.3% for Huanghua.

Upside risk: Better than expected performance in container and oil business
Downside risk: further market share loss in iron ore.

From GS Company Update - Tianjin Port Development Holdings (3382.hk) 24 March 2011