Results

• Within expectations – Reported core profit of RM130.6m for 3Q15 and RM372.7m for 9M15, which was 71.6% of HLIB’s forecast and 70.9% of consensus. We expect stronger 4Q15 on the back of tariff hikes effective Nov 2015.

Deviations

• None, annualized 9M was 95.5% of our forecast .

Dividends

• None.

Highlights

• YTD operational revenue grew +4.0% yoy primarily driven by stronger container revenue (higher throughput by +8.0% yoy) and conventional cargo revenue (higher cement handling by +21.2% yoy). Recorded YTD container throughput of 6.71m TEUs, representing 74% of our full year TEU forecast.

• Overall conventional throughput was relatively flat yoy with the decline in drybulk and liquid bulk being offset by the growth in cement segment (+21.2% yoy for 9M15), given the on-going construction works within Klang Valley. RORO movement was affected by the decline in TIV.

• Operational cost for 9M15 has declined by 3.1% yoy mainly attributed to lower fuel cost (dropped by 28.4% yoy on lower diesel prices) as well as improvement in container handling cost efficiency.

• EBITDA margin improved from 51.2% in 9M14 to 54.3% in 9M15 on the back of higher revenue and lower operational costs as well as improvement in utilization rate.

• Intra-Asia route showing moderate growth which slowed to +3% yoy in 9M15 post a drop of 5% yoy in 3Q15 attributed to slow down in China and Indonesia economy. Elsewhere, throughput from Asia-Europe, Asia-Australasia and Asia- America remained strong at +20% yoy, +15% and 109% yoy respectively. Expect healthy growth of 5-10% with positive growth momentum from O3 Alliance.

• The implementation of tari ff hikes is effective from 1st Nov 2015 for phase 1 and 1st Sep 2018 for phase 2. Eventually, management guided an average approximate increase of 30% on key container tariff items.

Risks

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

Forecasts

• Unchanged.

Rating

BUY

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 RM5.35 based on DCFE valuation.

Source: Hong Leong Investment Bank Research - 16 Nov 2015