• Westports partnered with MMC to acquire Boustead Cruise Centre (BCC) for RM230m
• The acquisition priced BCC at a discount to the market value. Westports’ immediate priority is to restore BCC’s operating profit to pre-Covid-19 level while management evaluates development options for the adjacent land
• We are neutral on the acquisition. While the acquisition is dilutive to 2022- 23E earnings (-0.1% to -0.2%), we see good development potential for the vacant land. Maintain HOLD with a revised DCF-derived 12-month price target of RM4.42 (from RM4.45)

Westports and MMC to Jointly Acquire Boustead Cruise Centre

Westports has entered into an agreement with Klang Port Management, a subsidiary of MMC, to jointly acquire Boustead Cruise Centre Sdn Bhd (“BCC”) from Boustead Holdings for a total cash consideration of RM230m. BCC owns and operates the Boustead Cruise Centre – a dedicated cruise terminal located in Port Klang.

An Opportunistic Acquisition at a Right Price

Boustead Holdings has put BCC, a non-core asset for sale, and MMC, which has the experience in managing cruise terminals, had approached Westports to jointly bid for the assets. The acquisition price of RM230m was below the independent valuer’s appraised value of RM289m.

Retains management team, evaluate long-term opportunities for adjacent land

Westports plans to retain BCC’s management team, for BCC has been operationally profitable prior to the onset of the Covid-19 pandemic. Management’s immediate priority is to restore BCC’s profitability to pre-Covid-19 levels. On the 58 acres of adjacent land, Westports has ruled out building new container terminals. Instead, management will evaluate options such as expanding the cruise terminal business or building warehouses / distribution centres for the businesses that would not negatively affect the ambience at BCC.

Trimming 2022-23E EPS by 0.1%-0.2%, Maintain HOLD

We are neutral on the acquisition - while the acquisition is dilutive to short-term earnings, we see good development potential for the vacant land. We trim our 2022- 23E EPS by 0.1-0.2% and lower our 12-month PT to RM4.42 (from RM4.45) after incorporating the financial impact from the acquisition. Maintain HOLD.

Source: Affin Hwang Research - 23 Mar 2021