- Westports yesterday announced that the implementation of Phase One of its upward revised container tariffs will now take effect from 1 Oct 2015 instead of the originally scheduled date of 1 Sept 2015.

- The company said this was pursuant to a letter received from the Port Klang Authority, while all other details of its earlier announcement remain unchanged. No reason was given for the change.

- We are neutral on this latest development and maintain our numbers for now, given that the impact on our forecasts and stock fair value will be very slight.

- To be implemented in two phases, the hike entails an average rise of ~15% on key tariff items, particularly terminal handling charges, which will now take effect on 1 Oct, and an another average increase of ~15% with effect from 1 Sept 2018.

- We maintain our FY15F and FY16F container throughput growth assumptions at 8% and 8.6%, respectively. We reiterate BUY, with an unchanged DCF-derived fair value of RM4.79/share (implied FY16F PE of 27x), given that:- (1) the full-year impact of the recent tariff hike will be realised in FY16F, leading to an EPS growth of 17%. (2) growth will continue to be facilitated by capacity expansion; CT8 will increase its container throughput capacity by 11% early next year to 12.2mil TEUs and by another 11% to 13.5mil by mid-2017; (3) potential of lower taxes under a proposed 5-year investment tax allowance. It has appealed for the ITA after the initial application was rejected. A reduction to 18%, visà- vis the statutory corporate tax rate of 24%, would see an 8% rise in earnings for FY16F and FY17F; and (4) stable dividend payout, with 75% dividend policy and yield of ~3%.

Source: AmeSecurities Research - 21 Aug 2015