Results

• Within expectations – Reported core profit of RM139.7m for 4Q15 and RM510.8m for FY15, which was 98.1% of HLIB’s forecast and 98.7% of consensus.

Deviations

• None.

Dividends

• Declared final net dividend of 5.78sen. Full year net dividend of 11.1sen, translating into 2.8% dividend yield.

Highlights

• FY15 operational revenue grew by +5.0% yoy from stronger container revenue (+8.1% yoy in throughput and 15% tariff hikes in 4Q15 for gateway). Westport is expected to benefit from full year implementation of tari ff hikes in FY16 for gateway and second round of tari ff hikes in 4Q18. However, higher rebates were given to customers to partially offset the tariff hikes in 4Q15. Furthermore, management guided for lower throughput growth in FY16 at 3-5%, given the expected slowdown in the Malaysian economy.

• Overall conventional throughput declined by 1.0% with cement growth offset by lower liquid bulk and break bulk. Nevertheless, growth in this segment can be expected in FY16, with the re-commencement of liquid bulk operation.

• EBITDA margin improved from 50.8% in FY14 to 53.8% in FY15 on the back of higher revenue and flat operational costs as well as improvement in utilization rate.

• Intra-Asia route showed moderate growth at +3% yoy (affected by slowdown in China) in FY15, while Asia-Europe, Asia-Australasia and Asia-America benefited from repositioning by Maersk from PTP to Westports. Other markets suffered downturn on the slump in crude oil prices.

• With the on-going restructuring and M&A exercises between major container shipping groups, management is unsure of the net impact to Westports at this juncture. They guided for potential loss of CSCL, but may be offset by the growth from CMA-CGM. Henceforth, management is still relatively confident of minor growth in FY16.

Risks

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

Forecasts

• Post adjustment for lower throughput growth, we lower our earnings forecast by 10-15% for FY16-17. We introduce FY18 earnings at RM702m (+8.0% yoy).

Rating

BUY

Positives

• Extension of ITA for CT8 and CT9; scheduled tariff hike; and TPPA beneficiary of higher trade activities.

Negatives

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

Valuation

• We maintain our BUY call with lower TP of RM4.80 (from RM5.35) based on DCFE valuation. We continue to like Westports’ business model of long-term sustainable, recurring and yet growing income.

Source: Hong Leong Investment Bank Research - 4 Feb 2016