- We maintain our HOLD call on Westports, with a slightly higher DCF-derived fair value of RM2.69/share vs.RM2.66/share previously (WACC: 6.1%; terminal rate after Year 2024: 1%). This implies a forward PE of 20x on FY14F earnings.

- Westports yesterday announced a core net profit of RM456mil for FY13 (+9.3% YoY) – 5.4% ahead of consensus’ RM433mil.

- It would have been within our estimate of RM425.4mil but for a lower effective tax rate of 16% (FY12: 17%) vs. our estimate of 21%. This was due to a higher tax allowance for more capex. For FY14F-FY15F, we have cut our tax rate assumption to 18% from 21%, raising earnings by 3%-5%.

- More importantly, its FY13 operating profit was within expectations, with EBIT at RM585mil (+8.2% YoY) vs. our estimate of RM584mil.

- Westports declared an interim dividend of 5.22 sen/share for FY13 – its first post-listing. This too is in line with our forecast dividend of 5 sen/share.

- Operating revenue stood at RM1.35bil (+10% YoY) vs. our estimate of RM1.33bil. Margin growth was relatively flat as net operating costs (excluding construction) rose by 12%. EBITDA margin (excluding construction) was maintained at ~53%.

- The container volume throughput is also within expectations, growing by ~8% to 7.47mil TEUs (vs. our forecast of 7.42mil TEUs) from 6.9mil TEUs in FY12. 4QFY13 saw a 12% YoY rise in both transshipment and import/export container volumes.

- The company remains optimistic that volume throughput growth in FY14 would be relatively similar to its past performances. It expects container volume to grow by 5%-10% in 2014. We maintain our forecast at 5% on the potential impact of the P3 alliance members rerouting their Asia-Europe/Mediterranean port calls by 2H14.

- For transshipment, it has seen encouraging improvements along major shipping routes, such as intra-Asia, Asia Africa and Asia Australasia. It sees opportunities to tap into emerging routes, such as China-Africa or intra-Southeast Asia, or to grow the regional feeder network.

- Westports said that CT7 is progressing as scheduled and Phase 1 of the project is on track to start operations by 2QFY14. A primary catalyst for the stock would be confirmation of its planned tariff hikes, which would need the approval of the Port Klang Authority (PKA).

Source: AmeSecurities