KUALA LUMPUR (June 24): Apex Securities Bhd has initiated coverage of Westports Holdings Bhd (KL:WPRTS) at RM4.19, with a “buy” rating and target price of RM5.08, and projected the port operator’s core net profit to grow by approximately 8% year-on-year in the financial year ending Dec 31, 2024 (FY2024), and 4% in FY2025, driven by: i) prospects of recovery in external and international trade; ii) resilience of the domestic economy; and iii) an influx of foreign direct investment supporting gateway volumes.

It said Westports is valued at RM5.08 (21.2% potential upside from the current price), and this valuation is based on the discounted cash flow-target price method, with a key assumption of weighted average cost of capital of 5.8%.

Apex Securities said the assigned fair value also corresponds to a two-year forward price-earnings ratio of 18 times.

“Based on our valuation metrics, this represents a 21.2% potential upside from the current share price of RM4.19,” it said.

The research house said key risks include intense regional competition, which poses a challenge for Westports. Situated along the Strait of Malacca, the group has competed with ports in Singapore and Thailand for over three decades.

“In recent times, all regional competitors are aggressively expanding their capacities to accommodate higher throughput volumes.

“Quicker-than-expected competitors’ expansion to capture more throughput could potentially dilute Westports' market share,” it said.