KEY INVESTMENT HIGHLIGHTS

• 9MFY24 results met expectations
• VAS ratio rose to 24.6%
• Conventional cargo volume remains strong
• No changes to forward earnings estimates
• Maintain NEUTRAL with an unchanged TP of RM4.30

Within expectations. Westports Holdings Berhad (Westports) posted a core PAT of RM230.9m for 3QFY24, bringing the total to RM639.0m for 9MFY24. These results align with our forecasts and account for 76%/77% of our/consensus full-year projections.

Quarterly. In 3QFY24, a +8.7%yoy increase in gateway volume was largely offset by a -9.9%yoy decline in transshipment volume, driven by lower movement of empties. However, container revenue grew by +6.6%yoy driven by value-added services (VAS), with the ratio rising to 24.6% (2QFY24: 21.6%). Conventional revenue grew by +30.3%yoy, driven by a +22.0%yoy volume increase at the break and dry bulk segments. Overall, core PAT increased by +18.7%yoy. Sequentially, despite a decline in container volume (-1.1%qoq), core PAT rose by +13.3%qoq, thanks to the strong contribution from VAS in container revenue and solid growth in conventional volume (+14.0%qoq).

Outlook. Management expects FY24 container volume to end flat, as shifts in transshipment congestion and a subdued market have dampened growth momentum. This is largely in line with our estimate of +1.2%yoy growth. They have guided for low single-digit growth in FY25, driven by strong gateway volume and recovery in transshipment volume, which we translate into a +3.3%yoy growth. Container volume could see a temporary rise if shipments are frontloaded in anticipation of trade tariffs following Donald Trump's election, though the impact will depend on the scope of the tariffs. Note that the China + 1 strategy has been a key driver of gateway volume growth, particularly from the paper, glass, and solar industries.

Maintain NEUTRAL. No changes have been made to our earnings estimates. Our DCF-derived target price remains unchanged at RM4.30 (WACC: 7.2%, g: 3%). The last closing price reflects a valuation of 16.0x FY25F EPS, which is close to its 5-year historical mean. Key potential upsides for the stock include the quantum of a tariff hike surpassing expectations or a positive revision in management's guidance for container volume growth.

Source: MIDF Research - 11 Nov 2024