• Maintain HOLD (TP: RM4.65). Westports’ 9MFY24 core net profit of RM631mn (+11.6% QoQ, +16.6% YoY) was slightly above with our but in line with consensus expectations, accounting for 83% and 77% respectively. The group 3QFY24, revenue and core net profit both increased by 2.8% YoY and 16.6% YoY respectively, mainly driven by higher revenue growth from container and conventional cargo and lower operating cost. We have revised up our FY24-FY26F earnings forecasts by 13%-14% to reflect lower depreciation and operating costs assumption. We maintain a HOLD call with a higher TP of RM4.65 (up from RM4.60). Our valuation is based on the DDM methodology (WACC: 6.9%, TG: 2%), which implies an 16.55x PER for FY25F.

• Key Highlights. Revenue grew 3.5% QoQ to RM572mn, driven by higher volumes in conventional cargo, particularly break bulk (aluminum ingots, steel coils) and dry bulk (soybean, maize, sugar). Container volume declined 2% YoY, driven by reduced transshipment on the Intra-Asia trade lane, hitting its lowest level since 2Q18. However, stronger import-laden boxes improved the gateway-to-transshipment ratio to 46:54. Core net profit grew 11.6% QoQ to RM227.3mn, driven by lower depreciation due to the extended useful life of existing concession assets from 2054 to 2070 under the new concession agreement and lower operating cost especially fuel and electricity.

• Earnings Revision. We have revised up our FY24F/FY25F/FY26F earnings forecast by 14%/13%/13% to account for lower depreciation and operating costs assumption.

• Outlook. The near-term outlook for the group remains subdued, with flattish volume growth expected this year, primarily due to softer transshipment activity on the Intra-Asia lane and external headwinds such as market uncertainties. ZIM’s reduced contribution and mid-year congestion further pressured transshipment volumes. However, robust gateway performance and higher VAS revenue, supported by congestion-driven demand, have cushioned the decline. Looking ahead, volume growth is projected to remain in the low single digits next year, reflecting a gradual recovery amid continued external challenges.

Source: BIMB Securities Research - 11 Nov 2024