• Port Klang Authority (PKA) has notified Westports that the implementation of Phase 2 tariff revision will be postponed to 1 March 2019 instead of 1 September 2018.

• We revised our FY18F-FY20F earnings by -2.1%/-2.2%/-1.4% in view of the delay. The negative impact is restricted to our tariff assumption for gateway volume.

• We remain positive on its outlook arising from better mix volume and limited direct risk on escalating trade war.

• Westports’ share price has done well recently. We downgrade to HOLD with revised DDM-derived TP of RM3.85 (from RM3.90) to reflect the delay of tariff revision. The delay of tariff revision has minimal impact on its expected dividend.

Tariff revision delays for six-months

Port Klang Authority (PKA) has notified Westports that the implementation of Phase 2 tariff revision will be postponed to 1 March 2019 instead of 1 September 2018 – a six months delay from initial schedule. The tariff revision will allow Westports to increase tariff at an average of 13% for key container categories.

Revision in earnings for FY18F-FY20F

We revised our earnings by -2.1%/-2.2%/-1.4% for FY18F-F20F (Table 1). The delay of tariff revision will impact our tariff assumption for gateway volume. Meanwhile, we made no change on our tariff assumption for transhipment volume as this is typically negotiated on long-term basis and thus we expect it would remain sticky.

Positive outlook and limited risk from trade war

We remain positive on Westports’ outlook with better volume mix underpinned by the good gateway volume growth due to incoming volume from Northport and local activity volume. We expect it also possess limited direct risk from the escalation of trade war tension between US and China as it only has minimal Asia-America throughput volume

Downgrade to HOLD with revised TP of RM3.85

Westports share price has done well, rising by 12% the past month. In view of the price appreciation and slight revision in target price, we downgrade our recommendation to HOLD. Our revised DDM-derived TP is RM3.85 (from RM3.90) mainly due to the delay in tariff revision. We expect minimal impact on its annual dividend payout.

Source: BIMB Securities Research - 13 Aug 2018