• Overview. 2Q19 net profit improved to RM166.3m (+19% qoq; +37% yoy) due to higher container volume (+8% qoq; +22% yoy), full container higher rate impact c.13% as well as cost efficiency. Profit margin improved to 36.6% (+2.9ppts qoq; 5.7ppts yoy).

• Key highlights. 1H19 registered higher container volume growth of 17% (transhipment: +21%, gateway: +9%) mainly due to stronger Intra-Asia (+20%) and Asia-Europe (+40%) performance, higher exports as well as low base effect in 1H18.

• Against estimates: inline. 1H19 net profit were inline with our and consensus forecast at 49.7% and 50.3%.

• Dividend. A 6.74 sen DPS was declared, implying 75% dividend payout. We estimate a total FY19 DPS of 13.6 sen.

• Outlook. Remains promising on the back of i) increase number of lines in Ocean Alliance, ii) greater trade activities for Intra-Asia on growing Southeast Asian economies, iii) higher container rate, and iv) higher yield from greater local cargo growth. Meanwhile, our forecast container volume for FY19 remains at c.5% growth on concern of slow 2H19 throughput growth amidst effect of higher base observed in 2H18 and competition from Singapore Port.

• Our call. We maintain BUY call with higher TP of RM4.65 (previous RM4.30) after rolling forward to FY20 figures. This valuation is based on DDM (Ke: 8.8%, TG: 5.5%) and implies a FY20E PER of 24x, which is justified given a stronger earnings driven by throughput recovery outlook, plus expansion in profit margin.

Source: BIMB Securities Research - 26 Jul 2019