Period  1Q14/FY14

Actual vs. Expectations 1Q14 results came within expectations with net profit of RM109m, which made up 23.0% and 22.6% of ours and the consensus full year estimates respectively.

Dividends  No dividends are declared in this quarter.

Key Result Highlights QoQ, core net profit was down by 13.4% mainly due to tax differential whereby effective tax rate is up by 17 pct points. We believe that this is due to the higher recognition of ITA (Investment Tax Allowance). Operational revenue dipped by 2.5% QoQ as container throughput is also down by 3.0% as 4Q is usually seasonally stronger. However, operating margins remained similar QoQ. (Q114: 53.1% vs Q413: 54.8%).

 YoY, 1Q14 net profit surged 38.3% underpinned by (i) savings of the management fee arising from termination of MSA. (1Q13 management fee: RM14.3m); and, (ii) robust growth in container throughput which was up 11.8% YoY.

 Other than Intra-Asia throughput volume (-0.6% YoY), all volumes in other trade lanes have grown substantially on YoY basis. Intra-Asia and Asia-Africa trade lanes, for instance, registered throughput growth of 7.1% and 25.0% YoY.

Outlook  Construction of CT7 is on schedule with 2 wharfs measuring 600m and yards completed in 1Q14. By the end of 2014, CT7 is scheduled to be fully operational and this will increase the group’s handling capacity from 9.5m TEU to 11.0m TEU.

 Management expects their container volume to grow at rate between 5.0% and 10.0% in 2014 driven by higher growth transhipment volumes from China-Africa, China-Middle East and Intra SEA routes. Management has also mentioned that China has not responded with their approval for the alliance yet and their intentions remain unknown, for the moment, given the target date for the final approval date would be in May.

 We concur with management’s view that P3 will not hit WPRTS’ volume significantly and the maintained the view that they are able to deliver 5%-10% throughput growth this year as mentioned.

Change to Forecasts   Maintain our forecasts and assumptions for now.

Rating Maintained at OUTPERFORM

Valuation  Our TP is maintained at RM2.91 based on DDM valuation (Ke: 7.3%, g: 1.3%).

Risks to our Call

 Lower than expected throughput growth

 Higher than expected depreciation and fuel cost

Source: Kenanga