Investment Highlights

We maintain Westports at HOLD as 9M24 core net profit (CNP) came within expectations at 77% consensus forecasts. YTD container throughput growth was dismal but within management’s guidance of low-single-digits. We expect 4Q24 container throughput to rebound on the back of front-loading cargoes ahead of a new tariff regime in the US and seasonal demand. We perform housekeeping adjustments and raise earnings by 2-3% over our forecast period but cut our FV to RM4.50/share (from RM4.93/share) as we exercise prudence over its long-term expansion plans.

• Maintain at HOLD. Changing analyst coverage, we raise earnings by 3% to account for lower operating cost assumption moving forward. However, we lower our FV to RM4.50/share (from RM4.93/share previously) as we rollover earnings to CY26 and peg at a lower target PE of 17.7x, which is 0.5x standard deviation above its 5-year average. Despite the group's expansion plans i.e. Westports 2.0, we remain conservative over its long gestation period (4 years to CT10's commencement of operation) and lower cashflows until implementation of its proposed tariff hike materialises.
• Expect 4Q24 container throughput to rebound. 9M24 CNP of RM638mil (+11% YoY) was within expectations, forming 79% and 77% of ours and consensus estimates respectively. This is despite a dismal 1% growth in YTD total container volume to 8.11 twenty equivalent units (TEU) attributable largely to in Israeli shipping ban in Malaysia and yard congestions up to the month of August. We think full year container volume will grow by 3.2% in 2024 - in-line with management's guidance - on the back of front-loading cargoes (ahead of US tariffs regime) and seasonal demand in 4Q24. For reference, the Shanghai Container Freight Index (SCFI) rebounded 13% vs the post-Golden Week low in mid-October which we believe reflects tight capacity and heightened container demand.
• Tariff adjustment target delayed to 2025 (from end-2024). Management informed that Westports 2.0 has commenced, starting with land clearing works. Once completed, dredging and land reclamation works will commence by end-4Q24 and continued with wharf construction by 1Q27. All-in-all, works at first phase at site CT10 is expected to complete by 3Q28. Additionally, the group is also finalising its multi-year dividend reinvestment plans (DRP) for the purpose of the terminal expansion.

Source: AmInvest Research - 11 Nov 2024