• 1Q21 core net profit grew by 23% yoy to RM188m on higher operating revenue and lower impairment loss on trade receivables. Sequentially, Westports’ core profit grew by 2% on higher operating revenue
• Westports’ 1Q21 container throughput grew by 5% yoy on higher transshipment (+7%) and gateway volume (+3%). Sequentially, container volume slipped by 6%, partly due to congestion during January 2021
• We raise our 2021E EPS by 7% after incorporating RM66m of potential insurance reimbursement. In tandem, we lift our PT to RM4.43 (from RM4.42). Maintain HOLD; at 20x 2022E PER, valuation looks fair to us

1Q21 Core Net Profit Grew by 23% Yoy to RM188m, Within Expectations

Westports reported a solid set of results – 1Q21 core net profit grew by 23% yoy to RM188m on higher operating revenue (+8% yoy) and lower impairment loss on trade receivables (RM75k in 1Q21 vs RM16.8m in 1Q20). Sequentially, core net profit grew by 2.3% qoq on higher operating revenue (+5% qoq), driven by higher contribution from value-added services (VAS). Elsewhere, Westports had booked in RM20m in insurance recovery for the quay cranes during the quarter, thereby lifting reported net profit to RM208m. All in, the results are within market and our forecasts – 1Q21 core net profit is at 26-27% of street and our full-year earnings estimates.

1Q21 Container Throughput Grew by 5% Yoy (-4% Qoq)

Westports’ 1Q21 container throughput grew by 5% yoy to 2.66m TEUs on higher transshipment (+7% yoy) and gateway volume (+3%). Sequentially, the container throughput slipped by 4% qoq due to lower transshipment volume (-6%), partly attributable to port congestion during January 2021. Despite the lower container throughput in 1Q21 (vs 4Q20), Westports reported higher container revenue of RM412m in 1Q21 (+5% qoq) due to higher VAS. Management shared that average daily container throughput in April 2021 is similar to March 2021. Elsewhere, management maintained their full-year container growth guidance of 0% to 5%.

Raising 2021E EPS by 7% on Insurance Claims; Maintain HOLD

We maintain our operational revenue / cost forecasts but raise our 2021E EPS by 7% after incorporating RM66m of potential insurance reimbursement in 2021. In tandem, we lift our DCF-derived price target to RM4.43 (from RM4.42). Maintain HOLD. At 20x 2022E PER, Westports is trading close to its 5-year average forward PER of 21x, which looks fair to us.

Key risks

Upside risks are a stronger-than-expected growth in container volume and earnings; downside risks include a global economic slowdown or sharp increase in operating costs.

Source: Affin Hwang Research - 30 Apr 2021