Highlights

Bimb Research Highlights

Author: kltrader   |   Latest post: Tue, 3 Dec 2019, 4:36 PM

 

Westports - A record quarter container volume

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  • Overview. Westports’ 3Q19 revenue improved to RM460.4m (+1.3% qoq; +10.3% yoy). This was due to i) increase in container volume (+1.5% qoq; +13.1% yoy) supported by higher Intra-Asia trade lanes as well as additional service from Ocean Alliance and ii) container tariff hike. Net profit increased 12% yoy due to stronger revenue and overall cost efficiency. However, qoq profit fell slightly by 4% due to higher overhead cost during the quarter.
  • Key highlights. 9M19 registered higher container volume growth of 15.9% (transhipment: +20%, gateway: +8.2%) mainly due to stronger Intra-Asia (+19%) and Asia-Europe (+38%) performance (refer table 2). We believe the increase in Intra-Asia trade lanes could be due to ongoing growth in Southeast Asian economies, as well as some diversification of manufacturing sourcing from China to other South Asia countries, which led to the greater trade flow.
  • Against estimates: inline. 9M19 net profit was inline with our and consensus forecast at 73% and 73.5%.
  • Outlook. Westport’s FY19 outlook remains promising on the back of i) strong Intra-Asia trade lanes growth, ii) additional services from Ocean Alliance, and iii) higher yield from expected greater local cargo. We believe Westports is on track to meet our estimate container volume of 10.5m TEUs this year (+10% yoy).
  • Our call. We maintain BUY call with TP of RM4.85. Valuation is based on DDM (Ke: 8.8%, TG: 5.5%) and implies a FY20F PER of 24x, which is justified given stronger earnings driven by throughput recovery outlook. We continue to like Westports’ stable business model that combines an attractive high yielding local cargo and volume-centric transhipment as well as stable dividend payout of 75%

Source: BIMB Securities Research - 6 Nov 2019

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