• Overview. Westports’ 2Q22 net profit of RM162.3mn saw a YoY decline by 8.8%, but QoQ increased by 6.9% mainly due to RM17mn tax overprovision adjustment made in this quarter. Excluding the tax adjustment, Westports’ PBT decreased by -11.6% QoQ and -6.7% YoY to RM219.9mn. The lower PBT was driven by lower container volume (-6% YoY) and higher overall operating cost especially fuel cost which increased by 50% QoQ and 114% YoY. Hence, PBT margin dropped to 43% (-5.2 ppts QoQ, -5.1 ppts YoY).

• Key highlights. Westports’ 1H22 container throughput of 4.88m TEU (- 8.1% YoY) wasimpacted by lower transhipment volume (-12.4% YoY), while the gateway volume remain flattish (-0.5% YoY). The decline in transhipment was mainly attributed to ongoing supply chain challenges, blank sailings and outset of global economic inflationary effects. Westports’ value added services revenue (VAS) trend is declining from its peak in December 2021 as port congestion in Westports eases.

• Against estimates: Inline. 1H22 net profit of RM314.1mn was inline with our and consensus full year forecast at 55.7% and 48.4% respectively.

• Dividend. First interim DPS of 6.91 sen was declared. We estimate a total FY22 DPS of 12.4 sen, implying 75% dividend payout.

• Outlook. Moving forward, we estimate 2H22 volume to register almost flattish growth YoY, despite reopening of the economy and low base volume in 2H21 (due to Westports worst port congestion and devastating floods in December). This is considering the potential impact of current global headwinds such as continued global supply chain disruption, geopolitical tensions and high inflation that may limit the recovery in Westports’ volume. Overall, we estimate lower FY22 container throughput volume of 10.06m TEU (-3% YoY) before increasing to c.5% YoY in FY23 on the back of improving operating environment. Margin for 2H22 could be under pressure due to high operating cost as well as lower VAS revenue.

• Our call. Maintain a HOLD call with unchanged TP of RM3.75, based on DDM (WACC: 6.8% and lower TG: 2%). This implies 18.5x PER for FY23F and decent dividend yield of 3.6%/4.4% for FY22F/FY23F at current price.

Source: BIMB Securities Research - 29 Jul 2022