• Upgraded to BUY (TP: RM3.95). Westports’ 9MFY23 Net Profit of RM573.4mn (+23.4% YoY) was in line with our and consensus expectations, accounting for 78.8% and 80.3% respectively. Westports’ 3QFY23, revenue and net profit both increased by 4.2% YoY and 29.7% YoY, driven by a 7% YoY increased in container volume (transhipment: +4 %, gateway: +11%). Gateway recorded its highest-ever quarterly volume, mainly coming from China. However, conventional volume fell by -20.0% YoY due to lower break bulk throughput. We believe in Westports' ability to navigate global economic challenges and remain optimistic on its long-term outlook, driven by improved global trade and continuous growth in intra-Asia trade lane, along with increasing FDI in Malaysia. We raised our TP to RM3.95 (from RM3.80) as we roll forward our valuation base year to FY24F. Our valuation is based on DDM (WACC: 7% and TG: 2%), which implies 17.5x PER for FY24F. We upgraded Westport to a BUY call.

• Key highlights. In 3QFY23, both revenue and net profit increased by +4.2% YoY and +29.7% YoY respectively, primarily driven by increase in Container revenue (+4% YoY) due to higher throughput volume and rise in Marine revenue (+18% YoY) supported by a significant increase in the number of container vessels berthing in the range of 10,000 to 13,300 TEUs. Conventional revenue dropped by -20% YoY mainly due to reduce in breakbulk and dry bulk volume. On a QoQ basis, net profit saw a slight increase of +1% QoQ, attributed to the rise in container volume, especially the increased demand for handling local boxes containing recycled paper, glass manufacturing materials and more recently, solar panels.

• Earnings Revision. No change to our forecast.

• Outlook. Westport's positive outlook is expected to persist, driven by i) improving growth in global trade distribution, ii) increasing intra-Asia trade, and iii) the anticipated completion of Liquid Bulk Terminal 4A in 1Q2024. Long-term earnings growth will be further supported by capacity expansion at Westport 2.

Source: BIMB Securities Research - 10 Nov 2023