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%).

• The port has been receiving additional port calls from the Ocean Alliance since April this year. This is mainly due to the rationalisation of the alliance’s network, coupled with, we believe, the cheaper port tariff at Port Klang (by circa 40% as compared to PSA) as well as the weak ringgit. We believe shipping lines have to penny-pinch amidst a tough operating environment on the back of global economic slowdown.

• On Westports 2.0 expansion plan – comprising eight new terminals, CT10 to CT17, that will double its container handling capacity from 14mil TEUs to 28mil TEUs – Westports said that it has completed technical studies and obtained approval from the port authority. It is currently negotiating with the government on the concession terms including the lease tenure. It hopes to conclude the negotiation by 1HFY2020.

Source: AmInvest Research - 6 Nov 2019