• Overview. Westports’ 1QFY22 operational revenue increased to RM516.4m (+5% qoq and +4% yoy) mainly due to overall increase in container revenue particularly higher value-added services (VAS) despite registering a lower container volume of 2.39m TEU (-3% qoq, -10% yoy). However, core net profit decreased to RM151.9m (-21.2% qoq, -19.4% yoy) largely attributed to a higher effective tax rate of 39% caused by a one-off prosperity tax in 2022.

• Key highlights. Westports’ 1QFY22 container throughput was badly impacted by lower transhipment volume (-9% qoq, -16% yoy). The decline was mainly attributed to ongoing supply chain challenges with the closures of some ports in the Far East. As for conventional cargo, lower volume (-12% qoq, -10% yoy) was caused by the decline in the liquid bulkbunker segment.

• Against estimates: Inline. 1QFY22 core net profit of RM151.9m (-21% qoq, -19% yoy) was inline with our and consensus full year forecast at 23% and 21% respectively.

• Outlook. Western sanctions arising from the Russia-Ukraine war and China's Shanghai Covid19 lockdown are the latest issues impacting global maritime trade. We are expecting a weak 1HF22 throughput volume, before starting to recover in 2HFY22. Maintain our FY22 container volume forecast of 10.67m TEU (+2.5% yoy) at this juncture with the potential downward revision on risks associated with prolonged China lockdowns, Russia-Ukraine war as well as stifled consumption on rising inflationary pressures.

• BUY call. Our TP remain RM4.50, based on DDM (Coe: 7.3%, TG: 3%) and implies a FY22F PER of 23x (about 5-year average PE). We reiterate BUY call on Westports favourably due to i) long term sustainable business model that combines with an attractive high yielding local cargo and volume-centric transhipment, iii) stable dividend payout of 75% and iv) concerted efforts in implementing ESG initiatives.

Source: BIMB Securities Research - 27 Apr 2022