Results

• 6MFY15 operational revenue of RM773.0m (+6.3% yoy) was translated into core net profit of RM241.8m (+4.9% yoy), accounting for 47.4% and 45.6% of HLIB and consensus full year estimates, respectively.

Deviations

• None.

Dividends

• Declared a 1st interim dividend of 5.32 sen (1H14: 5.10 sen), representing 75% payout ratio and yield of 1.3% (1H14 yield of 1.2%).

Highlights

• YTD operational revenue grew +6.3% yoy primarily driven by improvement in container and conventional throughput by +10% and 1% respectively. Recorded YTD container throughput of 4.42m TEUs, representing 48% of our full year TEU forecast.

• Conventional throughput is expected to be flat going forward with cement segment to post strongest growth (+12% yoy) as construction works going on in greater KL area. Similarly, RORO is expected to perform moderately as imposition of GST and unfavourable currency act as dampener to imported car segment.

• Operational cost for 1H15 has declined by -2.1% yoy, thanks to lower container as well as fuel cost. Container cost has reduced due larger to cost base in 1H14, whereby Westports has to outsource more trucks to cater to growing demand during peak period.

• A combination of higher operational revenue and lower operating cost has leads to improvement in EBITDA margin from 51% in 1H14 to 55% in 1H15.

• Intra-Asia route showing moderate growth of +8% (vs +13% in 1H14) mainly attributable to slow down in China and Indonesia economy. Elsewhere, throughput from Asia-Africa has dropped drastically by -19% (vs +16% in 1H14) as Ebola disease struck the region and oil price plunge thereafter.

• As expected, decision on tari ff hike and ITA extension are yet to be announced.

Risks

• Container trade volatility.
• Postponement of tariff hike.
• Stiff completion from regional ports.

Forecasts

• Unchanged.

Rating

BUY ; TP: RM5.03

Positives

• Expansion plan to drive earnings growth, extension of ITA for CT8 and CT9; and potential tariff hike.

Negatives

• Consolidation of shipping liners; and development of 3rd port in Port Klang.

Valuation

• We continue to like Westports’ business model of long-term sustainable, recurring and yet growing income. Hence we maintain our BUY call with unchanged TP of RM5.03 based on DCFE valuation.

Source: Hong Leong Investment Bank Research - 3 Aug 2015