Net profit in the first half of 2014 fell 5.4 per cent from a year earlier. Revenue in the first half of 2014 rose 42.0 per cent from a year earlier to HK $14.1 billion, but net profit was HK $402 million, down 5.4 per cent from a year earlier. The net profit is lower than we expected and the market expected. Operating cash flow rose 39.0% year-on-year to HK $1.336 billion.

The company's wharf throughput may record a single-digit increase in 2014. According to the company, there will be a single-digit increase in overall throughput in 2014; we expect non-container cargo to grow by 5% in 2014 and 7% in 2014, and container cargo will grow by about 7.6% to 14 million TEUs over the same period last year.

Lower the net profit forecast for 2014-2016. We raised our cost forecast for 2014-2106. We cut the 2014-2016 net profit forecast by 7.6%, 1.6% and 0.1%, respectively, to reflect the updated cost forecast. Earnings per share for 2014-2016 are forecast to be 0.132, 0.148 and 0.157 Hong Kong dollars, respectively.

Maintain the "neutral" rating, but slightly raise the target price to HK $1.55. We think the current valuation of the company is reasonable. Taking into account the current valuation of the port industry and the expectation that the Tianjin Free Trade Zone will be approved in 2015, we raise the target price to HK $1.55, which is equivalent to 11.7x, 10.5x and 9.9x the 2014-2016 forecast price-to-earnings ratio and 0.8x 2014 Pbig B.