KUALA LUMPUR (April 9): As the operator of the largest marine port in Malaysia, Westports Holdings Bhd is poised to benefit from a recovery in trade activities, supported by growth in the country’s exports of electrical and electronics (E&E) and commodities, according to RHB Investment Bank Bhd.

RHB, which on Tuesday upgraded its call on Westports to 'buy' from 'neutral' previously, said it currently prefers Westports among the infrastructure players following a shift to optimism on the country’s and region’s trade prospects.

The research house, the latest to join a large majority of analysts with a ‘buy’ call, also raised its target price to RM4.52 from RM4.12 for the port-and-logistics company, following the release of its financial results for the year ended Dec 31, 2023 (FY2023) in February.

Out of 17 analysts covering the stock, 14 including RHB has the stock on ‘buy’, while four have 'hold' ratings, while only one has a 'sell' call. The median 12-month target price among analysts for Westports is RM4.20, according to Bloomberg.

At 2.25pm on Tuesday, shares in Westports were traded unchanged at RM3.83, giving the stock a market capitalisation of RM13.06 billion. Year to date, the counter had risen 22 sen or 6.09%. The new target price by RHB provides an upside of 18% from the current trading price.

In a note on Tuesday, RHB reaffirmed its optimistic stance on Malaysia’s trade prospects for 2024, supported by brighter global and regional economic landscapes, the bolstering economic performance of China, and resurgence in the global technology cycle.

More specifically, RHB pointed to the growth potential of the E&E sector, which should boost the country’s drive to attract more inward foreign direct investments (FDIs).

Besides that, the government has instituted a range of initiatives and incentives aimed at stimulating FDI, such as tax incentives, reinvestment allowances, relocation incentives, and regulatory streamlining.

“We believe that Westports will be the primary beneficiary of these developments, particularly given that the intra-Asia segment accounts for 65% to 67% of the group’s throughput volume,” the research house said.

RHB said that the robust recovery in trade activities, both domestically and across the intra-Asia region, will also support further growth in Westports’ container volume, which saw a remarkable surge in December 2023.

For the first quarter of 2024, RHB expects Westports’ container volume to remain within the 2.3 million to 2.8 million twenty-foot equivalent unit (TEU) range, pencilling in a core net profit within the range of RM195 million to RM200 million.

Additionally, RHB also lifted its earnings forecasts for Westports for FY2024 to FY2026 by 4% to 4.5%, as it raised its container assumptions by 6% to 16% for the same periods.

For the full FY2023, Westports’ net profit increased 11.4% to RM779.43 million, from RM699.58 million for FY2022. Meanwhile, the group recorded its highest-ever revenue of RM2.15 billion, a 4% increase from RM2.07 billion for FY2022.

Westports handled a record container volume of 10.88 million TEUs in 2023. It said empty boxes repositioning and much-improved gateway volumes, arising from more industries and companies operating in Malaysia, supported the group in reaching a container volume growth rate of 8%.