Investment Highlights

• We raise our FY19-21F net profit forecasts by 2% each and increase our FV by 2% to RM4.81 (vs. RM4.73) based on 23x FY20F EPS. We maintain our BUY call.

• Westports’ 9MFY19 net profit came in within expectations at 72% and 75% of our full-year forecast and the full-year consensus estimates respectively

• Its 9MFY19 core net profit grew 23% YoY backed by a 16% growth in container volume handled driven by: (1) sustained growth in the intra-Asia trade lane; (2) market share gain from Port of Singapore Authority (PSA), particularly, volume from the Ocean Alliance; and (3) strong growth in gateway container throughput.

• 3QFY19 core net profit increased by 12% YoY thanks to the double-digit growth in container volume and the implementation of container tariff hike with effect from 1 March 2019.

• Taking the cue from Westports’ reaffirmed guidance for 12%–15% growth in container volume in FY19F, we raise our assumption to 14% from 12%. For FY20F, the company guided for 3%–8% in container throughput growth (vs. our assumption of 5%).

• We continue to like Westports as it has returned to the growth path following the loss of a major customer during a major reshuffling of the global shipping alliances in 2017. A 13% tariff hike effective 1 March this year has helped lift its margins and earnings. We also believe that the seaport operator is a beneficiary of the trade diversion from the US-China trade war as well as the improved China-Malaysia relations. Maintain BUY.

Source: AmInvest Research - 6 Nov 2019