Westports’ FY20 core PATMI of RM688.3m (+7.0% YoY) were within our and consensus forecast. Declared 2H20 dividend of 6.47 sen. Overall, the growth in FY20 was attributed to higher tariff and improved value added services from container contribution. For FY21, we are forecasting 3% container growth, inline with management’s guidance of 0-5% growth. Maintain BUY, with a higher TP of RM4.95 (from RM4.64) based on DCFE with assumption of CoE: 7.4% as we rolled forward our valuation to FY21.

Within expectations. Westports reported 4Q20 core PATMI of RM174.8m (-14.3% QoQ, -1.9% YoY), which brings FY20’s sum to RM688.3m (+7.0% YoY). The results were within ours (101%) and consensus (104%) expectation. Recorded FY20 container throughput of 10.5m TEUs, representing 101% of our TEU forecast. During the quarter, we added back a net +RM11.3m EIs (write-off of PPEs and impairment loss) from Westports’s reported net profit of RM163.5m.

Dividend. Declared 2H20 dividend of 6.47 sen (1H20: 5.05 sen, 2H19: 6.26 sen) going ex on 18 Feb 2021, which brings FY20 dividend to 11.52 sen (FY19: 13 sen).

QoQ. Revenue slipped -5.8% attributed to the lower container revenue (-6.6%) from lower transhipment (-5.8%) and getaway volumes (-5.8%), dragged by yard congestion. Management shared that congestion problem occurred maybe due to stricter Covid prevention SOPs and surge in volume in 3Q, which may have cause the delay in logistics infrastructure from ports to warehouse. All in, as operational cost was higher by 8.3% from higher manpower (+10.5%) and higher electricity cost (+20%), core PATMI was lower by 14.3%.

YoY. Top-line rose by 4.4% owing to higher container revenue (+5.9%) which was driven by increase in tariff and combined with growth in value added services, but partially offset by slightly lower transhipment and getaway by 2.2% and 1.0% respectively. There was an increase in volumes for conventional cargo by 15.6% notwithstanding the flattish conventional revenue (+3.1%), due to higher volumes of lower margin products. Overall, core PATMI was flattish at RM174.8m (-1.9%) as the higher revenue was offset by the higher operational cost (+6.6%) – mainly from higher manpower cost (+18.9%).

YTD. Revenue inched up by 3.0% from higher container revenue (+4.4%) despite registering lower container volumes (-3.3%) due to increase in tariff and improved value added services revenue. However, core PATMI rose by 7.0% on improved operational margins due to the flattish operational cost as well as lower finance cost (- 12.9%).

Outlook. Although there was a congestion problem at the end of 4Q20, management assured that the issue has eased and its productivity has normalised back in January. As expected, January number has shown a marginal increase of 1 -2%. Overall for FY21, we are forecasting 3% container growth, inline with management’s guidance of low-single digit growth (0-5%) on recovery of global trade. In terms of dividend, management shared that they will revert back the payout to 75% (from 60%) for FY21.

Forecast. Maintain forecast as results were inline.

Maintain BUY, with a higher TP of RM4.95 (from RM4.64) based on DCFE with assumption of CoE: 7.4% as we rolled forward our valuation to FY21. Notwithstanding the headwinds from the Covid-19, Westports has shown a steady growth in PATMI by 7%. As such, we continue to like Westports for its long-term sustainable business model, recurring and yet growing income from ongoing throughput growth at Port Klang, leveraging on its geographical advantages.

Source: Hong Leong Investment Bank Research - 3 Feb 2021