Westports’ FY21 core PATAMI of RM734.8m (+5.4% YoY) matched expectation. Overall, the improvement in earnings was largely attributable to higher value added services. For FY22, management projects a low single-digit growth (0- 5%) for container throughput. Maintain our core PATAMI forecast and HOLD call, with a lower TP of RM4.31 (from RM4.70) based on DCFE with assumption of CoE: 8.0% (from 7.4%) on expectation of rising interest rates.

Within expectation. Westports reported 4QFY21 core PATMI of RM205.2m (+14.6% QoQ, +11.5% YoY), which brought FY21’s sum to RM734.8m (+5.4% YoY). The results were within our (104%) and consensus expectation (103%). FY21 container throughput recorded at 10.4m TEUs (-1% YoY), representing 97% of our TEU forecast. For FY21, we excluded a net sum of RM73.5m (EIs mainly from insurance recovery) from Westports’s reported net profit of RM808.2m. Declared second interim single-tier dividend of 9.28 sen per share going ex on 14 Feb 2022, bringing FY21 dividend to 17.78 sen per share.

QoQ. Revenue stayed flattish at RM494m (-0.8%). Operational cost remained unchanged (+1.4%) as the higher fuel cost from higher MOPS price (+9.7%) was offset by lower manpower cost (-4.8%). However, core net profit increased by 14.6% due to lower tax expense (-36%) from the lower effective taxation rate (due to higher deferred tax assets).

YoY. Operational revenue increased by 4.7% despite lower container (-11.2%) and conventional (-7.8%) throughput but was more than offset by value added services (VAS) and to a lesser extent, incremental increase in revenue per TEU. Operational cost was higher by 7.7% owing to higher fuel cost (+61.9%), however this was slightly cushioned by the lower manpower (-4.8%), lower electricity (-8.3%) and lower maintenance & repair costs (-5%). Nevertheless, core PATAMI showed an increment of 11.5% thanks to lower finance cost (-5.6%) as well as lower tax expense (-22.7%).

YTD. Top-line rose by 7.7% attributable to higher container (+8.2%) and conventional revenue (+15.5%) despite relatively flattish volume (Container volume: -1% YoY; conventional volume: +3.7% YoY) on the back of higher VAS. Management shared that VAS revenue increased c.40% YoY from the higher dwell time of the boxes due to the congestion. Meanwhile, operational cost was higher by 13.7% from reasons mentioned above. Hence, core net profit only showed improvement by 5.4%.

Outlook. For FY22, management projects a low single-digit growth (0-5%) for container throughput and c.RM250m for capex (for the new cranes and maintenance). Management is expecting a weaker volume in 1QFY22 (Jan volume trending lower YoY) due to seasonally weak quarter (CNY celebration) as well as ongoing congestion, but should be offset by stronger 2QFY22 ahead. Overall, we remain cautious on Westports’ near term outlook due to uncertainty on the global supply chain disruption, rising inflationary cost (increase in fuel cost) as well as Prosperity Tax impact. The higher VAS revenue from the congestion should provide some support to earnings.

Forecast. We maintain our core PATAMI forecast. However, we estimate there will be -10.6% impact on FY22 reported PATAMI from the Prosperity Tax in which we will treat as an EI.

Maintain HOLD, with a lower TP of RM4.31 (from RM4.70) based on DCFE with assumption of CoE: 8.0% (from 7.4%) on expectation of rising interest rates. Despite expectation of better economic recovery this year, we remain cautious on Westports’ near term outlook due to uncertainty on the global supply chain disruption, rising inflationary cost (increase in fuel cost) as well as Prosperity Tax impact.

Source: Hong Leong Investment Bank Research - 28 Jan 2022