INVESTMENT HIGHLIGHTS

• Management believes that 2017 will be a year of two halves

• Negatives newsflow reflected in current share price

• WPRTS would be servicing a far larger alliance

• The gateway cargo segment could surprise on the upside

• Maintain BUY with unchanged TP of RM5.00

We met up with the management of WPRTS led by Mr. Ruben Gnanalingam (CEO) following the commencement of the new container shipping alliances starting April 2017, consisting of:

• Ocean Alliance (CMA CGM + APL, Cosco, Evergreen and OOCL)

• The Alliance (K Line, NYK, MOL, Hapag Lloyd, UASC and Yang Ming)

• 2M (Maersk, MSC and HMM)

Management believes that 2017 will be a year of two halves. In the first half, WPRTS would likely continue to record throughput growth following the formation of the new alliances which would give rise to adhoc calls. On the other hand, the second half could see WPRTS registering a decline in throughput in light of receiving fewer service commitments by the Ocean Alliance.

Negative news priced-in. In our view, negative newsflow surrounding WPRTS has already been priced-in. To recap, WPRTS has been allocated fewer services by the Ocean Alliance, while M&A activity within the container shipping industry could be unfavourable to WPRTS. WPRTS’ share price has fallen -7% in 2017, despite recording robust FY16 core PAT growth of +20%yoy. Meanwhile, positive factors have largely been ignored such as 1) stronger demand in the overall container shipping industry and 2) exposure to the Ocean Alliance which is 61% larger than the Ocean 3 Alliance (O3) in terms of capacity.

Maintain BUY with unchanged TP of RM5.00. We expect WPRTS to record container volume growth of 4.7% and 5.9% for FY17 and FY18 respectively. While overall growth will be at a slower pace compared to prior years, we assess that WPRTS’ higher yielding gateway cargo will grow at 4% in both FY17 and FY18 (FY16: 2.8%), improving its average container revenue/TEU. Hence, we are retaining our BUY call.

Source: MIDF Research - 12 Apr 2017