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Still NEUTRAL, with new DCF-derived MYR4.12 TP from MYR3.60, 9% upside, c.5% yield. FY23 results exceeded our and consensus’ expectations marginally. Monthly container volumes handled by Westports in Dec 2023 were at a record high, signalling a recovery in regional trade activities. The group also declared a final interim dividend of 8.7 sen.
Ending the year on a higher note. 4Q23 core operating earnings were at MYR206.1m (+5.7% QoQ, +29.7% YoY), bringing FY23 earnings to MYR779.4m (+23.4% YoY). This exceeded our and Streets’ full-year estimates at 105% and 104%. In terms of segments, 4Q23 container revenue was relatively stable at MYR460m (+5% YoY) despite an 11% increase in container volumes due to a much lower value-added services (VAS) contribution. Storage charges were also lower as containers’ average dwell time eased by >20%.
FY23 throughput analysis. Westports managed a total of 2.87m TEUs (+5% QoQ; +11% YoY) in 4Q23 with transshipment and gateway constituting about 57% and 43% of total volume. FY23 container volume reached 10.88m TEUs, largely within our expectations (103% of our FY23 container assumptions). Container volumes exceeded Westports’ initial guidance of low single-digit growth, due to repositioning of empty boxes in 1H23 and stronger gateway TEUs in 2H23, especially in Dec 2023. Geographically, intra-Asia regional trades (c.65% of container volume) continued to underpin overall volumes, with a robust 12% YoY growth.
Outlook. RHB Economics is anticipating a stronger recovery in 1H24, buoyed by the resilience of the US and ASEAN economies, rebound of the global technology cycle, and sustained economic growth in China. We revise FY24- 26F container volumes up by 5-8% on the back of growing evidence of improved trade activities in China and regional economies. Nevertheless, management still has a cautious stance on 2024 throughput growth.
Valuation. Post results, our FY24-26F earnings are largely unchanged. However, we lowered our WACC to 5.6% from 7.3% following updates to our debt-to-equity ratio target. Our DCF-derived TP is now MYR4.12 after incorporating a 4% ESG discount based on Westports’ ESG score of 2.8. We maintain our NEUTRAL call as Westports is fairly valued, with an implied FY24 P/E of 16.3x, closely aligned with its historical average of 16.8x and that of Malaysian peers (17.2x).
Downside risks: Lower-than-expected TEU volumes, higher-than-expected operating costs, and higher-than-expected tariff revision. The converse represents upside risks.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....