Investment Highlights

• We keep our FY19–21F forecasts relatively unchanged and maintain our FV of RM3.91 based on 21x FY20F EPS, at a 10% discount to Westports' average 5-year historical forward P/E of 23x to reflect the subdued outlook for the port sector over the short to medium term on slowing global economy. We maintain our HOLD call.

• Westports' 1QFY19 net profit came in within expectations at 24% and 23% of our full-year forecast and full-year consensus estimates respectively. 1QFY19 container volume grew 12% YoY thanks to: (i) the growth in intra-Asia trade lane; (ii) recovery from the Asia-Europe trade lane as the impact of shipping alliances reshuffling gradually subsides; and (iii) some market share gained from Northport.

• Management reiterated its guidance for 3–8% growth in container volume in FY19F, while we maintain our assumption of 4%. We expect the cumulative YoY container volume growth to ease as the year progresses as the low base effect in FY18 (due to the negative impact of the reshuffling of the global shipping alliances) gradually wears out.

• 1QFY19 net profit increased by 13% YoY, thanks to the double-digit growth in container volume and the implementation of container tariff hike with effect from 1 March 2019.

• As mentioned, we remain neutral on Westports due to the slowing global growth. However, there is a potential upside from stronger-than-expected global trade activities resulting from a favourable US-China trade deal, coupled with increased trade activities between Malaysia and China following the improved relations between the two countries recently. China was one of Malaysia’s largest trade partner in 2018, contributing to 13% of Malaysia’s total external trade.

Source: AmInvest Research - 29 Apr 2019