- We maintain BUY on Westports, with an unchanged DCFderived fair value of RM4.79/share, representing 27x FY16F PE (vs. a high of 29x in recent months).

- Westports management has reiterated a 5% to 10% growth in container traffic for FY15F, as volumes continued to be “holding up”, supported by August export figures.

- Its CEO Ruben Emir Gnanalingam recently told digitaledge Daily, however, that overall consumption would slow down on uncertainty over how the GST affects consumer.

- A strong pickup in exports has yet to be seen, but it sees a lag effect from the weakening ringgit that would see the impact being felt later. Additionally, the port has yet to experience a marked slowdown in imports.

- On average, Westports’ gateway traffic is equally composed of imports and exports, making up 50% each. While the weak ringgit will tilt the numbers towards exports, it does not foresee any dramatic change and the ratio could be at 51:49 in favour of exports.

- The weak ringgit is foreseen as having no impact on transshipment. However, we believe transshipment volumes will hinge largely on whether its main customers – the Ocean 3 Alliance – could continue to increase market share in an overall slowing trade environment.

- For 1HFY15, transshipment and gateway traffic accounted for 71% and 29% of total container volume, respectively. In terms of container revenue, the contribution is at about 60% and 40%, respectively.

- All in, we maintain our FY15F container growth assumption at 8%, cut recently from 10%. Positively, any slowdown in volume growth will be mitigated by the recent regulatory 15% increase in container tariffs which will now take effect from 1 Oct, 2015.

- While Westports remains open to potential M&As, it has yet to find a suitable target. It is eyeing a container brownfield location, but does not expect any deal to materialise any time soon as assets outside of Malaysia now will be expensive.

- Reiterate BUY for:- (1) the full-year impact of the tariff hike, which will be realised in FY16F; (2) CT8 will increase its throughput capacity by 11% by early next year to 12.2mil TEUs and by another 11% to 13.5mil by mid-2017; (3) stable dividend payout, with 75% dividend policy and yield of ~3%; and (4) potential of lower taxes, stemming from its appeal for a five-year investment tax allowance.

Source: AmeSecurities Research - 10 Sep 2015