Investment Highlights

• We maintain our forecasts and fair value of RM5.16 based on 22x FY23F EPS. This is in line with Westports Holdings’ average historical forward PE with a 3% premium to reflect a 4-star ESG rating as appraised by us (Exhibit 1). We maintain our BUY recommendation.

• Westports held an analyst briefing yesterday to provide an update on the situation at the port following flash floods caused by Tropical Depression 29W which hit the Klang Valley over the weekend. Here are the key takeaways:
  • The container and conventional facilities of Westports were not affected. However, the company highlighted that some employees were unable to report to work due to travel difficulties, which adversely affected productivity at the port, and added some berthing delays amidst the already congested port traffic.
  • Over the weekend, Westports staffing capacity was down to ~30% due to the flood disruptions. The situation has since improved as the floods subsided, with capacity at ~50% now. It expects to continue ramping up its capacity to achieve close to full capacity by the end of the year.
  • Westports expects to allocate ~RM1mil to help rebuild the community and assist its employees who were affected by the floods. This includes repairing access roads around Pulau Indah, clearing fallen trees, providing accommodation and food to affected evacuees in Westports’ Dewan Budaya Tan Sri G Culture Hall, etc.
  • Westports has handled a total container throughput volume of 10.12 million TEUs as of 18 December 2021, as compared to its low single-digit volume guidance for FY21F. Looking beyond FY21, the company is maintaining its conservative stance amidst the prolonged supply chain disruptions fuelled by the pandemic, and only expecting a flattish YoY container throughput volume growth in FY22F (vs. our forecast of 5% YoY growth assumption).
  • Overall, we are not overly perturbed by the latest development at Westports. While we believe the incident will cause some negative impact on the port’s efficiency and productivity, we anticipate this to be temporary. The company has also guided that it is not expecting any major financial impact from the incident.
• Looking beyond the pandemic, we believe the throughput of seaports, Westports included, will continue to grow in 2022 as global trade recovery gains further momentum, backed by the reopening of economies, businesses and borders.

• The outlook for the port sector in the region (Malaysia included) is resilient, underpinned by global trade and investments in the manufacturing sector that generate tremendous inbound (feedstock) and outbound (finished product) throughput for ports. There have been significant relocations of the manufacturing base by multi-national companies out of China to the region due to the rising labour and land costs, exacerbated by the US-China trade war. Westports has charted a long-term expansion plan to capitalise on these.

Source: AmInvest Research - 21 Dec 2021