Investment Highlights

• We cut our FY18-19F net profit forecasts by 8% and 5% respectively, reduce our FV by 2% to RM3.74 (from RM3.82) but maintain our HOLD call. Our new FV is based on 21x revised FD FY19F EPS, at about 10% discount to Westports’ average historical forward P/E of 23x to reflect the subdued outlook for the port sector over the short-tomedium term on slowing global economy and potential headwinds from the US-China trade tension.

• Our earnings downgrade stems largely from: (1) housekeeping; and (2) the reduction in our FY19F container throughput growth rate assumption to 3% per annum (from 5% previously).

• We maintain our FY18F container throughput growth rate of 5%. We understand that for 11MFY18, Westports’ container throughput grew close to 5% YoY (vs. only 2% YoY for 9MFY18) thanks largely to exceptionally strong gateway and transshipment volumes in the months of October and November.

• Key highlights from our recent engagement with the company are: 1. The company is hopeful about a potential 15% hike in Port Klang’s container tariff on 1 Mar 2019; 2. The company guided for volume throughput growth rate of 3–8% in FY19F, which we find a tad optimistic given the weak macro picture globally; 3. Westports is grateful for Transport Minister Anthony Loke’s efforts to engage with China Cosco Shipping Corporation Ltd and pitch to the world’s fourth largest container shipping company (and a key member of the Ocean Alliance) the idea of making Malaysia one of its transshipment hubs in Southeast Asia. However, we sensed cautiousness in Wesports on the likelihood of Cosco warming up to the idea over the immediate term; and 4. With its overall utilisation dipping below 70% following the commencement of CT8 and CT9, coupled with the uncertain global economic outlook, there is no major capex for Westports over the medium term.

Source: AmInvest Research - 17 Jan 2019