• Maintain HOLD (TP: RM3.95). Westports’ achieved a 1Q24 net profit of RM204.5mn (QoQ: -0.8%, YoY: +11.4%), which is inline with both our and consensus expectations, making up 26% and 27% of full year estimates respectively. Westport’s revenue rose by 7.5% YoY mainly driven by gateway container volume that jumped by +16.5% YoY to 1.2mn TEUs. This had more than offset the decline in transhipment volume that slipped by 2.6% YoY to 1.48mn TEUs due to change in trade route amidst Red Sea crisis. The group did not declare any dividends during this quarter. We maintain Westports to a HOLD call with unchanged TP of RM3.95, based DDM methodology (WACC: 7%, TG: 2%). This implies a 17.5x PER for FY24F.

• Key highlights. In 1Q24, total container revenue rose by 8% YoY to RM470mn due to higher charges for gateway boxes and higher contribution from Value Added Services (VAS). Rental revenue also rose by 8% YoY due to a new tenant from the liquid bulk operation. Other cost increased by 28% YoY due to deploying up to 10 tug boats and higher outsourced lashing cost for container operations. However, finance cost declined by 10% due to RM50mn Sukuk Musharakah repayment in 1Q24. Consequently, net profit grew by 11% YoY to RM205mn.

• Earnings Revision. No change to our FY24-26F earnings forecast.

• Outlook. The Asia-Europe trade route saw volume decline due to liners choosing the longer Cape of Good Hope route. Nonetheless, that was offset by strong gateway volume underpinned by Malaysia’s competitive local currency, regionalisation of trades as well as increased in foreign investment that boosts export cargoes.

Source: BIMB Securities Research - 3 May 2024