Westports’ 3QFY21 core PATMI of RM179.0m (+1.1% QoQ, -12.2% YoY) brought 9MFY21’s sum to RM529.6m (+3.2%); the results were slightly above expectation at 80%. Revenue remained flattish YoY despite registering lower container volume (supply chain disruption) mainly due to higher value added services (VAS). Nevertheless, margin was impacted due to higher operational cost from manpower, fuel and electricity. For FY21, we are forecasting 2% container growth inline with management guidance of low single digit growth. We increase our forecast by 5-7% for FY21-23 from higher VAS. Maintain our HOLD call, with a slightly higher TP of RM4.70 (from RM4.67) based on DCFE with assumption of CoE: 7.4%.

Slightly above. Westports reported 3QFY21 core PATMI of RM179.0m (+1.1% QoQ, -12.2% YoY), which brought 9MFY21’s sum to RM529.6m (+3.2%). The results were slightly above our expectations (80%) from higher value added services (VAS) but within consensus at 75%. Recorded 9MFY21 container throughput of 7.93m TEUs (+3% YoY), representing 73% of our TEU forecast. For 9MFY21, we excluded net EIs of RM55.7m (mainly from insurance recovery and gain on disposal of PPE) from Westports’s reported net profit of RM585.3m.

QoQ. Revenue stayed flattish at RM498m (+1.8%). Operational cost remained unchanged as the higher fuel cost from higher MOPS price (+10.7%) was offset by lower electricity cost (-8.3%) and lower maintenance & repair cost (-5%). Subsequently, core net profit inched up by 1.1%.

YoY. Total revenue remained flattish (-0.6%) despite lower container throughput (-10.5%) mainly due to VAS. The lower container volume was due to lower gateway volume (-18.4%) reflected by domestic lockdown as well as lower transhipment volume (-6.3%) from the yard congestion and broader supply chain issue. Operational cost was higher by 15% owing to higher manpower cost (+10.5%), higher fuel cost (+47.6%) and higher electricity cost (+10%). In turn, core net profit showed a decline by 12.2%.

YTD. Top-line rose by 8.8% attributable to higher container (+9.2%) and conventional revenue (+19.3%) from higher volume (container volume: +2.6% YoY; conventional volume: +8.5% YoY). Meanwhile, operational cost was higher by 15.8% from the reasons mentioned above. Hence, core net profit only showed improvement by 3.2%.

Port congestion. The port congestion has not yet eased since some of the countries are still under lockdown measures (New Zealand is the latest that imposed lockdown apart from Bangladesh and Vietnam). Current yard utilisation is at 95-99% which caused bottleneck at the port. Management expects the supply chain disruption to likely linger for at least 1-2 years as some countries may still impose lockdowns if resurgence of cases happens. Outlook. Management shared that October volume is still trending the same as 3Q volume with a decline of 10% YoY. We expect 4QFY21 to be a flattish QoQ from the yard congestion which affected volume.

Forecast. We Increase Our Forecast by 5-7% for FY21-23 From Higher VAS.

Maintain HOLD, with a slightly higher TP of RM4.70 (from RM4.67) based on DCFE with assumption of CoE: 7.4%. At current price, valuation remains fair as the stock is trading at 19.8x-21.6x FY21-23 P/E (5 year mean: 21.7x) and 4.3-4.9x FY21- 23 P/B (5 years mean: 5.7x).

Source: Hong Leong Investment Bank Research - 1 Nov 2021