China Merchants Port Holdings Co Ltd

HKEX:144

Earnings Call Analysis

Earnings Call Transcript 2018-Q2

[Operator]

Welcome, and thank you for standing by. I would like to inform all participants that this conference as well as the Q&A is being recorded and will be available to clients of JPMorgan. Parts of this conference call may also be reproduced in JPMorgan's research. If you have any objections, you may disconnect at this time. Members of the press are not permitted on this call. If you are with the press, please disconnect now. [Operator Instructions]

I would now like to turn the call over to Mr. Calvin Wong. You may begin.

[Calvin Wong, analyst]

Thank you, operator. Hello, everyone, and depending on where you are, good morning, good afternoon or good evening. Thank you all for dialing in to our post interim results call -- JPM live call, with the management team of China Merchants Port, which reported their first half 2018 results earlier today. My name is Calvin Wong and I'm part of the Asia Infrastructure Industrials and Transportation Equity research team here in Hong Kong, primarily covering the ports and logistics sectors.

Today, we're very honored to be joined by the management team of China Merchants Port, including Ms. Carol Cheng, General Manager of Corporate Communications Department; Ms. Fiona Ho (sic) [ Vivien Ho ], Investor Relations Manager; and Mr. [ Bill Zhang ], Investor Relations Officer.

And without further ado, I will hand it over to Ms. Carol Cheng to walk us through the results and give us the presentation. Carol?

[Cheng Carol, executive]

Yes, thank you. Thank you, Calvin. Good evening or good afternoon or good morning, everyone. Thank you for joining the call today. I think you will have the presentation on hand, if you have the presentation, then turn to the Page 4. For our presentation, I will give you some -- the financial summary for our 2018 interim results.

Before I go into details, I'd like to mention that when we prepared this presentation, actually we're constructing the figures on the revenue, EBIT and EBITDA based on the proportionate consolidation basis, which is we have taken into account 100% contribution from our subsidiaries plus equity portion contribution from our associate and joint venture. Then we thought from the total revenue, we did HKD 16.5 billion for the first half of 2018, down by 31.9% year-on-year, which is -- which was mainly due to no longer sharing of the revenue from our shares from the port-related manufacturing associates, CIMC, since June 2017. The revenue from port operation increased by 10% year-on-year to HKD 13.4 billion.

Our net profit increased by 73.1% to HKD 5.5 billion due to the gain on disposal of Chiwan Wharf of HKD 3.7 billion. Also according to the new accounting standard effective from 2018, we record a fair value change in financial assets and financial liabilities in P&L, which is -- which was -- which we have a net loss of HKD 640 million loss for our net profit. If we exclude these nonrecurring items, recurring net profit still declined by 4.3% to HKD 2.2 billion, which is again affected by no more profit contribution from CIMC. If you see our recurring net profit from port operation, actually it increased by 13.7% year-on-year to HKD 2.8 billion. Actually, it's mainly due from -- due to the better performance from overseas projects and contributions from the [new] investments.

Our EPS was HKD 1.66. Taking into consideration of sharing results and anticipated need for our future development, we proposed the amount of interim dividend of HKD 0.22 per share. We'll maintain the full year dividend payout ratio at 40% to 50% for the reporting purpose.

This -- and then please turn to Page 5. This page actually shows the segment analysis. Benefits from overseas operation and added contribution from new investments, our port revenue grew by 10% to HKD 13.4 billion, while our container volume increased by 11.1% if we use the accounting base of calculation. EBITDA from port operation, up by 11.1% to HKD 6.5 billion, while EBIT increased by 2.6% to HKD 4.4 billion, which reflects the solid operating leverage contributed from our overseas project.

With more marketing effort to enhance utilization, our bonded logistics warehouse in Shenzhen almost fully utilized at 99%, up by 23.6 percentage points. EBIT from our bonded logistics sector improved by 41.5% to HKD 92 million in the first half of this year.

Please turn to Page 7. In this slide, it shows that our net operating cash flow increased by 8.7% to HKD 2 billion because the dividend we get from our associates and joint ventures increased due to the better result of last year. The net operating cash flow from our subsidiaries maintained the same level as last year.

All right. If you see the Page 8, we -- I would like to show you the balance sheet. And in the top [ of the ] graph, it shows our total assets and equities. Due to consolidation of TCP in Brazil during the first half, our total assets increased by $12.2 billion from the last year-end. Our equity increased by $2.4 billion because of the increase in profit earnings. On the bottom left, our cash CapEx was HKD 16.3 billion in the first half of 2018, with about HKD 15.1 billion for acquisition CapEx, which mainly includes HKD 5.6 billion for TCP in Brazil. There's a difference between the announcement and these figures because we consolidated TCP that's why we left off the cash of the TCP. And then we are paying $5.4 billion for the final payment of Hambantota projects, and then $3.6 billion for the Port of Newcastle in Australia and HKD 0.5 billion for the increased stake in SIPG. And for the PTV CapEx, which are shown in light blue and green band, we spent $1.3 billion for existing projects including widening Tonggu Channel, upgrading of Haixing Port, terminal construction by Shantou Port Group and terminal expansion by TCP.

And then in the second half, we expect to incur around $1 billion PTV CapEx for the above projects. The expected cash CapEx for the full year of 2018 will be around HKD 7.5 billion. On the top-hand right chart, shows our interest-bearing debt. In order to finance our CapEx, our debt balance increased to HKD 14 billion at the end of June. Our net gearing ratio increased to 35.4%, with the cash balance of HKD 8.5 billion. To adopt prudent financing policy and diversify our funding channel, we issued a USD 1.5 billion fixed rate notes at the end of July to meet the funding needs for the acquired long-term investments. The fixed rate notes consists of 2 tranches including a 5-year tranche of USD 900 million notes with a coupon rate at 4.375% and a 10-year tranche of USD 600 million notes with a coupon rate of 5%.

Please turn to Page 13 to have a look on our port segment by region. Our reported segment in port operation includes PRD, which includes Hong Kong; YRD; Bohai Rim; other regions in greater China, which mainly includes Shantou Port Group, Zhangzhou, Zhanjiang Port Group and Taiwan. And then we have other locations, which is overseas operations. PRD region handled 9.2 million TEUs for the first half of 2018, basically maintaining the same level of the first half of last year, of which both of our Western Shenzhen and Hong Kong operation dropped slightly by 0.5% to 5.5 million TEUs and 2.9 million TEUs, respectively. It's because Haixing Port is -- suspended operations for restructuring and the downward trend in the whole Hong Kong market.

Revenue in PRD increased by 3.7% to HKD 3.5 billion, of which consolidated entities in PRD increased by 5.8%. The tariff cuts on international O&D boxes in Tianjin Port has executed in 2018 but the impact was manageable. EBITDA and EBIT margin in PRD region maintain the same at 51% and 37%, respectively, compared to the same period of last year. YRD delivered 22.2 million TEUs for the first half of 2018, increased by 4.6%, but this revenue contribution decreased by 9.6% to HKD 4.5 billion. It's not wholly affected by the tariff cuts in SIPG, but we deduct a HKD 1.5 billion share of revenue from SIPG according to adoption of new accounting standard on revenue in Hong Kong terms. If you refer to SIPG PRD GAAP interim results, the revenue on container throughput only dropped by 0.1%.

Affected by the adoption of new accounting standard again, [ direct cost ] fair value change in financial assets to P&L, EBITDA and EBIT contribution from YRD decreased by 12.5% and 23.2%, respectively. If we exclude this nonrecurring item, EBITDA and EBIT increased by 11.4% and 7.1%. Our Bohai Rim volume increased by 4.5% to 10.2 million TEUs for the first half. But the revenue contribution from this region decreased by 1% as a result of the Dalian Port reduction on the low profitable trading business. Revenue contribution from investment in Qingdao increased by 10% year-on-year.

In the first half, our overseas projects performed better than expected. Most of projects reached double-digit growth in terms of volume. Benefit from the stabilized oil hike, our investment in West Africa, LCT in Togo and TICT in Nigeria grew by 36.1% and 33.8%, respectively. Kumport in Turkey was the fastest growth project in the first half. Its growth rate was 57.8%. CICT handled 1.3 million TEUs, up by 16.4%, and Terminal Link handled 6.7 million TEUs, up by 12.6% year-on-year. Due to unstable economic environment in Ethiopia, Djibouti volume dropped by 15.8%.

Revenue from overseas operations increased significantly by 82.8%, mainly coming from the contribution of new consolidated investments, TCP in Brazil and HIPG in Hambantota in Sri Lanka. If exclude the new investment, revenue grew by 29.1% due to the volume increase and tariff increase in existing overseas investments. The proportion of both EBITDA and EBIT from overseas operations greatly increased to more than 25%. The bonded EBITDA margin from the overseas operations was over 60%.

Due to the structural improvement, we have no control in the investment in our port portfolio. Therefore, we prepare a new port segment by region to separate the performance of port consolidated entities and associate and joint venture in Page 14 for your easy reference. In this page, we exclude the nonrecurring items to show you a clear picture on our financial segments, and you can match the figures with the segments in our financial statement directly.

And then for second half, we expect the local economy to stay on recovery momentum. The China economy, we have already expected it will enter into a stage of slow growth due to the high base effects and from downside factors like Sino-U.S. trade frictions and tightening of economic policies. However, benefits from diversified investment in different regions, we can capture growth from our overseas investments particularly in large markets.

For the shipping industry, the demand has increased in the first half. However, we will -- we should be careful on the market change affected by the Sino-U.S. trade fiction. To sum up, we will insist on our strategic goal of -- to be a world-leading, comprehensive port service provider to enhance capacity, improve quality and efficiency and deliver better returns to our shareholders.

So I gave you a brief update on our interim results. I think we can start with the Q&A section.

[Calvin Wong, analyst]

Operator, can you open up for Q&A, please?

[Operator]

[Operator Instructions]

[Calvin Wong, analyst]

While we're waiting, why don't I kick it off with a question. So obviously, I think the China-U.S. trade tensions continue to dominate the headlines and really is a key overhang for the sector. So are you seeing any specific impact on your port operations, either right now or over the last few months? And how do you expect volumes to trend, let's say, for the -- in the rest of the year given the second round of tariffs have now come into effect?

[Cheng Carol, executive]

Okay. Thank you, Calvin, for those questions. For the U.S. trade war, I think up to now, when we are looking at our volume figures, actually, we don't see any big impact on the volume. Maybe we will find that they will be somewhat lower in the first half that's why you will see our volume is quite strong in the first half. I won't go through all the details on our volume because I already mentioned about different regions' volume growth in the first half. But if you have the chance to see our July figures, actually, we find that the growth is still there. Although they -- you will compare them month by month if you're a little bit sure, but I think the trend has not dropped significantly. And then although we have not announced or published August figures, we believe that the trend is still there. I think, U.S. -- the trade war is impairing the expectation for the good [ primary ] increase. That's why everyone knew -- keep to hold or to process the order earlier. But we believe that the demand for the global economy is still there, and there will not be that big impact on the whole demand of the world. But in case there is some serious situation that there is no more trade between U.S. and China, I would say under our portfolio, actually, the route to -- direct from our terminals to U.S., actually, it accounts for around 10% or even less than 10%. So even if there is no more trade between U.S. and China, the impact will be that we will lose 10% of this, that we're missing from our port portfolio. But if the demand is still there, I think the factory or the consumer will try to find another way to deliver their goods in different area. So I think the impact will not be that big, and up to now, we don't think a big change on our projection on 2018 that we still maintain 5-year -- mid-single-digit growth on our volume in China and double-digit growth in overseas. In the case that they keep going on a long-term basis, the situation, then it may affect the whole economy, not just only the port industry. So in that case, I think it's not only a 1 industry problem. It's talking about the whole market. The demand increasing, then I think it not only affect the port industry, okay? So we will keep the projection on the volume for 2018. It's mid-single-digit in China and double-digit in overseas.

[Calvin Wong, analyst]

Operator, can you check if there are any questions?

[Operator]

Speakers, right now, there are no questions in queue. [Operator Instructions]

[Calvin Wong, analyst]

In that case, maybe I'll ask another one. Can you talk a bit about the restructuring that we did with respect to the Shenzhen Chiwan Wharf sale and the broader restructuring at the group level as well? What's the expected positioning of China Merchants Port going forward especially in relation now to the Chiwan Wharf, which will ultimately become our parent? So just strategy-wise, how will this kind of shape the way we do future investments? How are we going to be looking at the future development going forward?

[Cheng Carol, executive]

Okay. I think I would like to share with you the future structure of the Chiwan Wharf and us, under China Merchants Group, in Page [ 34 ] of the presentation. I think we already mentioned many times that why we disposed Chiwan Wharf, because we would like to honor the long-term position undertaking. And then we disposed it at [ PTV ] at 29.3x, and we recognized a gain of HKD 3.7 billion in the first half. I think I don't want to explain too much on why dispose it because, as you know, we have the second step for the restructuring. After the restructuring, Chiwan Wharf and us already announced that Chiwan Wharf will become our shareholders. And after they become our shareholders, we have different position name on the port operation. From China Merchants Port's perspective, we have the experience for investment in overseas. We have the management team for overseas investment, and I think we have more experience on invest in overseas and manage the assets in overseas. So -- and of course, we are the listed company in Hong Kong. We have the platform for funding, for financing in overseas money. That's why we are more -- so we select to positioning to invest in overseas rather than using Chiwan Wharf as the platform. So in future, after the restructuring, China Merchants Port will become an overseas platform under China Merchants Group for the port operations under China Merchants Group. For Chiwan Wharf, they become our shareholders. That's why we said that they will enjoy the benefits that China Merchants Group -- or sorry, China Merchants Port earned from the overseas or existing assets. So they already have part of the benefit from us. And another positioning for them is they will more focus on port consolidation in China. You may ask why we have this kind of separation of duty, because Chiwan Wharf is now A-listed share company -- or a B-listed company, and their share price or their share price in China is more close to the market in China. That's why it is easier for them to do some port consolidation in China. So in future, if they have any chance for port consolidation in China, they will be the leading partner. For China Merchants Port, we are A share, and as you know, our market line is not that good at this point of time. And I think it's not that easy for us to do some port consolidation for Chinese assets nowadays. So from this perspective, maybe we are not -- we are separate, in different platforms. It's easier for the China Merchants Group to do some port consolidation or to develop further on the ports in overseas. And then if you see -- you may ask again whether we will sell some assets under our portfolio in China to Chiwan Wharf or exchange some assets between us, I would say we will not -- we don't need to do so. Why? Because Chiwan Wharf will become our shareholder. They already enjoy the benefits from our existing assets, including the assets in China or in overseas. It's not well for them to exchange assets and then they need to reevaluate again the assets' value, and then if we have the gain on disposal, then we have to pay tax. So it's costly for them to do so even they already enjoy the benefits. So under existing situation, I think we will keep the existing assets that we have on hand. And then if there is opportunity to invest overseas, we, China Merchants Port, will be the leading party. If there is opportunities to develop or to have a port consolidation in China, then Chiwan Wharf will be the leading party. I'm not saying that we don't have any further cooperation. Maybe we will have some cooperation, but we have the separation of duty to avoid the competition issue again. So it's clearly to separate our positions to one platform is looking at China, another platform is looking at overseas. So after this restructuring, we will do the same for looking at any opportunities to overseas. But under our criteria, our investment criteria to have -- to satisfy the financial return, to assess the good locations and also to consider any risk and then we would like to get the control on the assets. I think we are not changing our criteria for further investment in overseas. But today, I would say after repositioning, it is more clear for us to have different direction to have further development.

[Calvin Wong, analyst]

Just a follow-up on the overseas development. So we've made quite a few acquisitions over the last 1 to 2 years. What's kind of our overarching strategy going forward now? How about the pace of investment? Because if we do look at the balance sheet, we -- our gearing has crept up. So just want to get a sense of future overseas acquisition strategy.

[Cheng Carol, executive]

Okay. For overseas -- or our investment strategy, as I mentioned, just maintain, find a good location, financial return requirement at 10% to 12% IRR and then we assess the -- any risk like political risk, currency risk, et cetera. And then the final one is a little bit change compared to in the past that we would like to find some investments that we can get the control. So under these 4 criteria, actually it's not that easy to find the opportunity. Although you mentioned that if 1 or 2 years we acquire much in overseas, that seems to be so easy to get the project. I will tell you that most of the projects are -- we take 2 or 3 years to negotiate or even some of the projects need to take 5 years to negotiation and do some study and negotiate with different parties, et cetera, to have the project. It's not that easy. But just the case that it happened together in just 1 or 2 years, you're right that our balance sheet is comparatively high gearing to our previous year. But if you're looking back to 2014 or '15, actually, our net gearing ratio at that point of time is 42.1%. And then we issue the MCS to increase our equities. So today, our net gearing ratio is 35.4%. I'm not going to -- it's not too high, but we are still looking at how to make -- or to reduce the gearing by different areas like we still have some cash on hand, we may consider to repay some loans. In the second half actually, we will have some dividend income which is from our associates and joint venture. And then I think -- and then the improving performance of overseas investment that we can have more cash back that should improve our gearing. In the future, our overseas investment, we're still looking at different locations. I think I will tell you that actually, we have the team for overseas investment. They have 20 to 30 projects on hand, under -- 30. But it doesn't mean all of them can complete the deal. So it's difficult to tell you that it will happen again in the near future or not. But from our perspective, of course, we consider, not only for the project but as a company as a whole, to consider whether we can have the ability to invest further. It's the idea that we will compare. As you see this year, we also disposed some of our assets on hand to finance some new investment in overseas. That's why, of course, funding by that is one of the ways to finance further investment. But sometimes, we also consider any reallocation of our internal resources to dispose some logical business or less controlling assets to exchange some investment, or high profitable investments. So we maintain the investment strategy -- or investment criteria for overseas investments. At the same time, we also consider our internal or our own ability to see whether we can further invest or not. I hope I can answer your questions.

[Calvin Wong, analyst]

Yes. I'm still not seeing any questions on queue, but I think one relevant item that -- or issue that's come up is in China, we have this announcement of a Greater Bay Area development, where some news flow has also mentioned potential consolidation of port operators or port operations within the PRD region. Do we have any view on this particular subject, whether it's feasible or how realistic it is in terms of execution?

[Cheng Carol, executive]

I think there are so many news about the Great Bay. But I think if you talk about the consolidation in Great Bay, it's not that easy. I think I'll just give you -- I'll try to reduce the area that we mentioned. Even we are talking about the consolidation in Guangdong provinces, it's not that easy. Like Hong Kong, Yantian, Yangshan, West Shenzhen, Nansha can be combined together. I think it's more for different party, it's not all under SOE, and it's difficult for -- to have the same direction or the same agenda and are behind. So I think it's not that easy to talk about the consolidation in Great Bay. But I will say actually, they will have a lateral consolidation that I'll give you the example. Hong Kong, if you see the volume, actually is a continuous advance on the volume. That means the importancy of the Hong Kong terminal is gradually reduced because the shipping lines can go directly to China. So you will see the Shenzhen volume increase or even Nansha, the volume is totally increased. That means they have different advantage or competitive advantage in different regions. So maybe 1 day, they will gradually reduce some terminal in that region. It's not because of they will have Great Bay and combine together, it's gradually change of behavior of the shipping lines to select the most convenient, most efficient terminal. And the China Merchants Port, actually we have the Western Shenzhen, and we are more close to east -- west part of the world like intra-Asia, Europe. And then although we have the competitor, Nansha, close to us, but we have different geographic environment. For them, they are more close to Dongguan or Guangzhou, so they are most close to the factory. But the shipping lines have to go inside, in the Pearl River. But for us, we are not that close to the factory, but we are more close to the sea. So we have different competitive advantage. I think it's difficult to replace each of us. So I think under China Merchants Port, our investment in Western Shenzhen, we still have the competitive advantage. And also under our portfolio, we already invest in Zhanjiang and also Shantou. That means we have some investment in the West and in the East, in the -- under the coastal line -- under Guangdong province. That means we have more influence in Guangdong province. Even though, talk about the Great Bay, they will have more cooperation. Of course, we are welcome to have more cooperation. But the -- we start from the cooperation, we have to understand what is our strength and weakness. And I think China Merchants Port, we select the location under Guangdong province. Its management saw us even though we have some port consolidation in future in Great Bay. But up to now, we don't -- we didn't hear anything about the port consolidation under Guangdong province. So I think let's see if there will have anything to happen. But up to now, I don't have anything, and I don't think we have any highlight for this consolidation in Great Bay or in Guangdong province.

[Calvin Wong, analyst]

Hello? Operator?

[Operator]

It seems like someone got disconnected.

[Technical Difficulty]

[Calvin Wong, analyst]

Yes. So sorry, a bit of technical difficulties there. I guess another relevant issue at this point in time is how might the reshuffling of shipping alliances impact the volumes at some of our key ports, especially if the alliances start to group their volumes and their port calls? So especially in sort of some of our key locations, do you anticipate this to have any significant impact? Is this a key risk in your view with especially the recent acquisition of Orient Overseas by COSCO Shipping?

[Cheng Carol, executive]

Okay. Before I answer, actually COSCO and OOCL combined together doesn't change too much or even the shipping alliance. Actually, the shipping alliance is effective from last year April, yes. I think the impact already we felt in last year, and it will continue the alliance up to now. And if you see the volume, I don't think there will have much change. If you talk about the shipping lines consolidation, I will say actually we have not only served the direct customer for the shipping line. Actually, we have -- we may serve the demand behind the ports. If there is no demand behind the ports, I think even if you have the best relationship with one of the shipping lines, it doesn't mean they will set the route to your terminal. So I think from our perspective, why we select the location in different regions like Sri Lanka, like Djibouti or even in West Africa or even in investment in the significant terminals in China, Shanghai, Western Shenzhen, Dalian, et cetera, because we are serving the demand behind the terminals that will direct the routes from the shipping lines to there. So I think even there, we will have shipping alliance, but I don't think there will have some, [in fact], impact on our volume, particularly it already has some historical figures that the impact will not be changed too much. Of course, there will have a [ definite ] impact on the volume discounts because they will have more volume when the shipping lines or shipping alliance select that location than if you set up this on the volume discount because more volume, more discount. But if you're going back to the figures of last year, I don't think that it will have a big change. And as you mentioned, it only serves the demand behind, so even there is not -- this shipping lines come to our terminal, then they will have another shipping line to our terminal to serve the demand behind our terminals.

[Calvin Wong, analyst]

Right. Makes sense. Maybe shifting gears a little bit. There's a lot of talk still about SOE reform. A lot of companies' SOEs are now starting to issue things like incentive shares, share option schemes, things like that, to better align the incentives of management to the minority shareholders. So any sort of update on this front? And anything planned for China Merchants Port?

[Cheng Carol, executive]

Yes, we have internally discussed about the options before. But I think we will not do it this year because, as you know, we have run our -- the asset restructuring during the year for Chiwan Wharf. But whether we will have any thinking on the option scheme, I think we already internally discussed this. But during that time, we have no plan for the option scheme in 2018. But will we consider in next 1 or 2 years? It depends. Because although there may not have the option scheme on hand to give the incentive to the senior management, but we still have a comprehensive appraisal scheme to our senior management that we have to assess all the performance factors or KPI to them. I think it's already an incentive plan for them to do better on the performance. In fact, if you see the performance, actually, we are keeping to increase our performance on the net profit. And then just thinking, we have to find a good timing for the option scheme only. So we will consider whether it's a good timing for the option scheme. But at this point in time, we don't have any plan. I see that the option scheme is a good way to give the incentives to the senior management, but we have to select the good timing to do so.

[Calvin Wong, analyst]

Understood. And I think another big worry for a lot of investors was that after the NDRC announced some sort of intervention, right, asking for the cut in base tariff rates, that there could be additional intervention going forward. Do we have any views here in terms of the potential for that? Has the NDRC kind of come back and given us feedback on their thoughts and how they think we've executed the adjustments that we said that we would?

[Cheng Carol, executive]

Yes. Maybe -- I think I'll just mention under the presentation, I will say I understand that the tariff cut is affecting our business. And then but it's still manageable because we are thinking -- for this time, the tariff cut is mainly for the minor customers that they are charged higher than the cap. But whether they will -- the NDRC will come again in 2019, et cetera, I will say I don't know at this point in time, but NDRC is quite satisfied on our correction of the -- at this time that we have tariff cuts. And some of the terminals like Shanghai, et cetera, they are trying to change their contract to the customer to delete the unfair cost to the customers. So I think up to now, we don't have anything from NDRC to say they are not satisfied. And in this case, we -- highly possible that they will not come again. But I can't say it has no chance that they would come again or not. But I would say up to now, they are quite satisfied in what we have done during 2018.

[Calvin Wong, analyst]

And I think one more thing on just dividends, right? So we announced a fairly stable dividend -- interim dividend year-on-year. Just wanted to clarify our full year payout target or plan, whether it'll be on the total reported profits, whether it will be on core profits. Just give us a bit more color on what to expect for the full year dividend payout.

[Cheng Carol, executive]

Okay. I just mentioned during the presentation, I would say we will try to maintain the 40% to 50% on the dividend payout on the reporting profit. Although in the first half, we maintained the same absolute dividend amount at HKD 0.22, even we have disposed -- recognized a disposal gain. But at the same time, as we have such much CapEx during the first half, we would like to combine all the factors together and see whether we have sufficient cash for distributing dividend. That's why we are trying to combine all the factors at the end of the year to declare the final dividend to share the benefits or the better performance of 2018 to our shareholders. So we are trying to do is we will try to maintain 40% to 50% in the reporting profit. But just this case, we like to combine all factors together in the first half and decide the final dividend together with the performance of the whole year. So just to clarify, it would be based on the reporting profit like before.

[Calvin Wong, analyst]

Very clear. Operator, can you check one more time whether there are any questions?

[Operator]

Speakers, right now, there are no questions on queue. You may proceed.

[Calvin Wong, analyst]

Okay. If that's the case, I think we can wrap it up at this point. So I'd like to thank Carol and the rest of the management team of China Merchants Port. If anyone has any questions, please feel free to reach out to myself or the rest of the team here at JPMorgan. And thank you very much, and have a good day.

[Cheng Carol, executive]

Okay. Thank you, Calvin, and thank you, everyone. Bye-bye.

[Calvin Wong, analyst]

Thank you. Bye.

[Operator]

Thank you. That concludes today's conference. Thank you all for joining. You may disconnect now.