- We maintain our HOLD call on Westports, with an unchanged DCF-derived fair value of RM2.69/share (WACC: 6.1%; terminal rate after Year 2024: 1%). This implies a forward PE of 19x on FY14F earnings.

- Westports last Friday announced a core net profit of RM109mil for 1QFY14 (+17% YoY; -22% QoQ), accounting for 23% of our and consensus forecasts.

- We deem the result to be in line with expectations. The 1QFY13 profit accounted for only 20% of the full-year earnings. No dividend was declared.

- Note however, the effective tax rate was 17% for 1QFY14 vs. 25% for 1QFY13. A similar tax rate of 17% for the previous quarter would have seen an only 7% rise in core net profit. Our full-year effective rate assumption is 18%.

- Operating revenue rose by 11.4%, but net operating cost rose by nearly a similar quantum at 10.8%.

- The YoY topline growth was due to an 11.7% rise in container throughput vs. our full-year growth forecast of over 5%. The 1.93mil TEUs achieved in 1QFY14 accounts for 25% of our full-year estimate of 7.9mil TEUs.

- Our numbers take into account the potential impact of the P3 alliance members rerouting their Asia-Europe/Mediterranean port calls by 2H14. Westports has said it does not expect any material impact.

- The 1QFY14 operating profit was within expectations, with EBIT at RM145mil (+11% YoY) – also accounting for 23% of our EBIT estimate of RM632mil. EBITDA margin (excluding construction) was maintained at 51%-52%.

- It posted a record high monthly volume of 693,000 TEUs in March 2004, which it described as timely as the new 600m container terminal (CT7) would be fully operational by yearend and will increase capacity to 11mil TEUs.

- The gateway traffic volume surpassed the 200,000 TEUs mark in March. Robust growth was seen in 1QFY14 for all trades lanes, especially for Asia-Australasia (+31%) and Asia-Africa (+25%). Intra-Asia, which accounts for half of the volume of Westports, grew by 7%.

- Ahead, Westports said growth trajectory is expected to remain robust throughout FY14 boosted by increasing container throughput from gateway and transshipment.

- An upside risk to our forecasts include a smaller-thanexpected impact from the P3 move. Westports also said it may seek tariff hikes from the Port Klang Authority.

Source: AmeSecurities