Analysts stay cautious over Westports’ outlook

KUALA LUMPUR (April 27): Analysts on Wednesday (April 27) remained cautious over Westports Holdings Bhd’s near-term outlook, given the uncertainty on the global supply chain disruption, arising from the extended lockdown in Shanghai and ongoing geopolitical tension.

Hong Leong Investment Bank Research analyst Chua Siu Li said in a note that as the lockdown in Shanghai drags on, coupled with the ongoing geopolitical tension choking the global supply chain, she expects to see a spillover effect on Westports, potentially negatively impacting its throughput volume for the first half ending June 30, 2022 (1HFY22), despite its yard utilisation rate easing to below 80% currently.

“While we do not rule out the possibility of vessels diverting to call and discharge their containers at Westports, we believe Westports will be cautious to not take on too many containers, in order to avoid the reoccurrence of yard congestion,” she said.

Post updating her financial model, she lowered Westports' earnings forecast for financial year ending Dec 31, 2022 (FY22) to FY23 by 3% to 6%, and revised down its throughput growth assumption for FY22/FY23 to +1.5%/+3%.

Following earnings adjustment, her target price (TP) for Westports is lowered to RM4.27 from RM4.31. She maintained a "hold" call on Westports.

Meanwhile, CGS-CIMB analyst Raymond Yap said Westports' FY22 earnings may encounter headwinds from a potential year-on-year (y-o-y) decline in container volumes, and a softening of box storage revenues.

He said Westports' 1QFY22 core net profit was below expectations at 22% of his and 23% of consensus full-year forecasts, due to a higher than effective tax rate.

“Despite the 10% y-o-y fall in container volumes in 1QFY22, Westports is guiding for ‘near identical’ volumes in FY22 compared to FY21; hence, we cut our volume growth forecast from 6% to 1%,” Yap said.

He reduced Westports FY22 to FY24 core earnings per share forecasts by 4% to 8% on the back of a cut in container volume growth forecast for FY22, from 6% y-o-y to 1% y-o-y.

Yap reiterated a "hold" call on Westports, and lowered its TP to RM3.78 from RM3.88.

AmInvestment Bank also lowered Westports forecast by 4% for FY22 and 8% for FY23 to reflect lower container throughput due to supply chain disruptions arising from the lockdown in Shanghai and the Ukraine-Russia war.

“We expect further contraction in container volume in 2QFY22 before recovering in 2HFY22,” it said.

Despite lowering Westports TP to RM4.76 from RM5.16, AmInvestment maintained a "buy" call on the stock.