• Westports’ 4Q20 core net profit grew by 3% yoy to RM184m on the back of higher operational revenue, stringent cost control and a RM10m write-back on trade receivables
   
• Full-year core net profit of RM682m (+6% yoy) was 4% above our expectation due to lower-than-expected operating costs
   
• We raised our 2021-22E EPS by 4-6% and lift our price target to RM4.45. Maintain HOLD. At 22x 2021E PER, Westports is trading close to its 5-year average forward PER of 21x and looks fair to us

4Q20 Core Net Profit Grew by 2.7% Yoy to RM184m

Westports reported a good set of earnings – 4Q20 core net profit grew by 2.7% yoy to RM184m on the back of a higher operational revenue of RM472.5m (+4.4% yoy), stringent cost control and the recognition of RM10.1m of write-back on trade receivables. These positives more than offset a normalisation in the 4Q20 effective tax rate to 25% (from 20.6% in 4Q19). In spite of the lower container throughput (-2% yoy), Westsports’ 4Q20 container revenue grew by 6% yoy to RM412m on the back of higher revenue from value-added services such as reefers and storage.

2020 Core Net Profit of RM682m Was Above Market and Our Expectations

Cumulatively, Westports’ 2020 core net profit grew by 5.7% yoy to RM682m on the back of a higher operational revenue of RM1.84bn (+3% yoy) and flat operating costs, where a 12% increase in manpower (higher number of staff, salary increments) was mitigated by lower fuel costs due to the weakened global oil prices. To preserve its capital, Westports has lowered its 2020 payout ratio to 60% (from 75%) and declared a lower DPS of 11.52 sen (-11% yoy). Overall, Westports’ 2020 core net profit was 3% above consensus estimates and 4% above our forecasts – the earnings beat was due to lower-than-expected operating costs (staff cost, repair and maintenance costs) and the recognition of a RM10.1m write-back of trade receivables in 4Q20.

4Q20 Container Throughput Slipped by 2% Yoy Due to Congestion Issues

Westports’ 4Q20 container throughput slipped by 2% yoy (-5% qoq) to 2.77m TEUs, attributable to the congestion at Westports during late-November 2020 to December 2020. Management shared that the congestion has since eased. For full-year 2020, Westports handled 10.5m TEUs of containers (-3%) – gateway volume increased by 3% yoy attributable to higher activities in the paper and polymer industries while transhipment volume fell by 7% yoy due to lower activities in 1H20.

Source: Affin Hwang Research - 3 Feb 2021