• Overview. Westports’ 4Q20 operational revenue improved +5% yoy on the back of growth in container value added services, as well as increase in restow volume. Net profit jumped 30% yoy mainly due to i) higher container revenue and ii) 4QFY19 loss of RM53m (impairment vessel incident). On qoq basis, net profit declined to RM163.5m (-19.8%) mainly due to i) lower container volume (-5%) and ii) higher operating cost especially manpower cost as more headcount, annual increment and bonus been paid during this quarter. Profit margin dropped to 34.5% (-6.3 ppts qoq, -5 ppts yoy).

• Key highlights. 4Q20 total container volume dropped to 2.77m TEUs from 2.94m TEUs as both transhipment and gateway fell by -5% qoq. This is mainly due to yard congestion during the quarter affecting the throughput efficiency at ports.

• Against estimates: Inline. FY20 net profit of RM654.5m (+10.8% yoy) was inline with our and consensus forecast at 99%.

• Dividend. A 6.47 sen DPS was declared, bringing a total FY20 DPS of 11.52 sen (60% payout) and dividend yield of 2.6%. Moving forward, dividend payout will be back to 75%, bringing a total FY21F DPS of 15.6 sen.

• Outlook. Despite the challenging environment, we maintain our FY21 volume assumption growth of c.4% in view of vaccines roll-outs which will aid economic recovery. Long-term prospect remains positive supported by improvement in global trade and the country’s strong investment in manufacturing and commodity sectors. Additionally, container throughput in the region is also expected to improve on expected investment shift in global supply chain out of China especially to Southeast Asian countries on account of tensions involving the world’s big economies, in our view.

• Our call. Maintain our forecast and TP of RM4.80. Valuation is based on DDM (Ke: 8.3%, TG: 5%) and implies a FY21F PER of 22.8x, which is within its 5 years historical mean PER. Since our upgrade in November, its share price has performed well increasing c.20% since early November. We maintain Buy for its positive long term catalyst and pending further discussion with the management of Westports over the next month. We like Westports for its long-term catalysts, i.e. throughput recovery outlook as well as stable business model that combines an attractive high yielding local cargo and volume-centric transshipment. At current price our TP offers an upside of 8.5% which includes FY21 dividend yield 3.5%. Accumulate on dips.

Source: BIMB Securities Research - 3 Feb 2021