INVESTMENT HIGHLIGHTS

• PTP remained strong in the wake of the recalibration of shipping alliances

• No plans for physical footprint expansion in next 2 years but PTP plans to invest in efficiency via purchase of operating equipment

• PTP has an advantage over PSA in terms of land availability, enabling a wider Free Zone to be setup

• Solid product jetty at RAPID Pengerang to fill up the gap from the expiry of the MOLF contract in December 2018

• Revising earnings upwards slightly following adjustment in JPB container throughput

• Maintain BUY with a revised TP of RM1.39 per share

PTP so far... In FY18, container throughput at Port of Tanjung Pelepas (PTP) grew by +6.7%yoy to reach 9.0m TEUs, the highest in three years. Even during the recalibration of shipping alliances which took place in April 2017, PTP demonstrated its resilience by recording a +1.4%yoy, compared to Port Klang which faced a -9.0%yoy drop. We attribute PTP’s strength in container throughput to its strategic partnership with the 2M shipping alliance where one of its members, Maersk, also holds a 30% stake in its port.

Berth expansion plans at PTP. PTP currently operates at a capacity of 12.5m TEUs per annum with a utilisation rate of ~70%. There will be no expansion of physical footprint in the next two years. Instead, PTP plans to invest in efficiency via the addition of eight more triple Ecranes to handle Maersk’s 2nd generation of Triple-E vessels. In the long run, PTP has planned to increase capacity by another 3.4m TEUs by 2025 under the phase 3A berth expansion plan which will see the implementation of automation systems.

Source: MIDF Research - 1 Apr 2019