Period

1Q16/3M16 Actual vs. Expectati ons

1Q16core net profit of RM150.7m was well within expectations, accounting for25% and 23% of consensus and our estimate, respectively.

1Q16 core net profit has been adjusted for a one-off investment gain amounting to RM20.3m from the disposal of investment securities.

Dividends

None, as expected. Key

Results

Highlights

YoY, operational revenue grew 12.8% on healthy throughput growth of 6.6% to 2.41m TEUs, from transhipment volume growth of 9.1%, while gateway declined marginally by 1.6%. PBT jumped by 32.2% aided by savings from lower fuel cost (-34%) while there was a one-off investment gain (RM20.3m) from the disposal of investment securities. All in, core net profit rose by 25.4%, aided mostly by significantly lower tax rates of 18.9% (vs.24.7% in 1Q15) on reinstatement of the Investment Tax Allowance (ITA) beginning FY16.

QoQ, 1Q16 operational revenue increased by 4.8%, driven by a full quarter effect of the tariff hike implementation of c.15% effective Nov-15, and on the back of higher throughput volume (+3.0%) from transhipment volume growth of 4.0%, while gateway declined marginally by 1.6%. PBT grew by 27.0% due to: (i)a one-off investment gain (RM20.3m), (ii) lower fuel cost (-25%), (iii) lower administrative cost (-45.8%), and (iv) lower other expenses(-7.6%). Meanwhile, effective tax rate was lower at 18.9% due to abovementioned reasons, allowing core net profit to increase by 9.1%.

Outlook

Capex of RM750-250m in FY16-17E for CT8 expansion.

ITA was renewed for three years (2015-2017) with a guided effective tax rate of 15% for FY16-FY17.

FY16 volume growth was guided at single-digit considering the global economy slowdown and the volatility in currency from challenges in FY16. We maintain our estimates of 4.1-4.2% in FY16-17E (refer overleaf).

However, we think that the effect of tariff hike which will be fully reflected in FY16 as well as the renewal of ITA can mitigate the impact of slower volume growth to earnings.

Change to Forecasts

We make no changes to our FY16-17E numbers.

Rating

Maintain MARKET PERFORM

Valuation

Our DDM-derived Target Price of RM4.27 (@ a discount rate of 6%). Our TP implies a Fwd PER of 22.3x, which is trading at +0.5SD above its 2.5-year historical average.

Note that WPRTS’ historical average only consists of 2.5 years as its IPO was in Oct-13.

Risks to Our Call

Higher-than-expected throughput growth.

Lower-than-expected operating costs.

Source: Kenanga Research - 29 Apr 2016