Westport - Westports and Northport buying Boustead Cruise Centre

Date: 22/03/2021

Source  :  BIMB
Stock  :  WPRTS       Price Target  :  4.80      |      Price Call  :  BUY
        Last Price  :  4.22      |      Upside/Downside  :  +0.58 (13.74%)

  • Westports and Northport’s unit Klang Port Management SB (KPM) are acquiring 100% equity in Boustead Cruise Centre SB (BCC) for a total cash consideration of RM230m payable in 50:50 ratio.
  • We are neutral on the acquisition as we find the recovery in the cruise business to be protracted.
  • The purchase implies P/B of 0.79x which we deem fair, given the opportunity to secure a complementary business with earnings potential over the longer term.
  • No change to earnings forecast pending completion of the deal. Maintain BUY with unchanged DDM derived TP of RM4.80.

Joint acquisition of Boustead Cruise Centre SB (BCC)

Westports announced on Friday that it has jointly with Northport’s unit Klang Port Management SB (KPM) entered into a Share Sale and Purchase Agreement (SSPA) with Boustead Holding Berhad to acquire the entire 100% of its wholly-owned subsidiary BCC, for a total cash consideration of RM230m payable in 50:50 ratio. Upon completion, Westports and KPM will each hold 50% shareholding (or 184,856,447 ordinary shares) in BCC for cash consideration of RM115m each. The acquisition will give ownership and control of BCC’s port facilities and services for cruise ships and navy vessels on 69.8 acres of land at Pulau Indah. Facilities on the property comprise a jetty, two parcels of land with a 5-storey terminal building together with a car park as well as another six parcels of adjacent lands that has yet to be fully developed. The proposed acquisition is expected to be completed within 6 months from date of SSPA.

Rationale of the acquisition

Acquisition would provide opportunity for Westports to expand into the cruise terminal business and explore other complementary activities by increasing the utilisation of the nearby vacant land owned by BCC.

Our thoughts on the acquisition

We are neutral on the acquisition on concerns regarding the uncertain outlook of the cruise and tourism industry which has been drastically affected by Covid-19. To date, there is no clear visibility as to when the country’s borders will be re-opened to facilitate the tourism industry giving rise to a potentially delayed and protracted recovery of the cruise business.

Despite our near-term pessimism, the opportunity to acquire a complementary business with ready facilities offer Westports with future earnings potential over the long term. We find the BCC share purchase for RM230m – shared equally by Westports and KPM – is beneficial as both parties stand to gain from BBC lands acquired with a combined aggregated fair market value of RM289m appraised by a certified valuer. Together with BCC liabilities being excluded under the purchase agreement, we deem the acquisition price which implies P/B of 0.79x to be fair.

Source: BIMB Securities Research - 22 Mar 2021

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