HPH Trust takes HK$19 billion “goodwill” write-down on Hong Kong terminal assets

Hutchison Port Holdings Trust (HPH Trust) yesterday took a HK$19 billion “goodwill” impairment write-down of its Hong Kong terminal assets, amid mounting concerns that multi-billionaire Li Ka-shing, who ultimately controls the outfit, is gradually retreating from his home base of Hong Kong.

HPH Trust, the Hutchison Whampoa subsidiary that owns Pearl River Delta container ports, said the one-off, non-cash HK$19 billion impairment was recognised against the goodwill of a “cash-generating unit in Hong Kong as it is adversely impacted by the uncertainties in the global economy and demand, the continuing challenging trading environment faced by the Hong Kong operations and challenging labour cost pressure.”

Singapore-listed HPH Trust confirmed to the South China Morning Post that the write-down was made to Hong Kong International Terminals, and “to a lesser extent, the rest of the HK assets.” HPH Trust was spun off from Hutchison Port Holdings, the world’s biggest port operator by throughput.

The charges resulted in an HK$18.6 billion net loss in 2014 for HPH Trust, a stark reversal compared to the HK$1.67 billion profit it posted in 2013.

HPH Trust’s Hong Kong assets comprise a 100 per cent stake in Hong Kong International Terminals (HIT), 50 per cent in Cosco-HIT Terminals, and 40 per cent in Asia Container Terminals, all of which are located in Kwai Tsing port, Hong Kong.

The HK$19 billion charge represents 88 per cent of goodwill, an intangible asset item, in HPH Trust’s Hong Kong assets at the end of 2013.

“A write-down on goodwill is easier to process than on tangible assets, because it is a relative subjective measurement,” said an analyst who declined to be named.