Westports (WPRTS)’ earnings were spot on. Margins held up well owing to economies of scale, which also mitigated the increase in overall cost. The  P3  Alliance,  which  has  yet  to  receive  regulatory  approval,  poses minimal  risk  in  the  near  term,  as  we  had  previously  stated.  Although earnings were  in  line,  volume  was  slightly  higher.  This  prompts a  2% upgrade in earnings. Maintain BUY, but with a higher FV of MYR2.91.

• Spot  on.  WPRTS  FY13  revenue  and  core  earnings  (excluding management fee) of MYR1.35bn and MYR456m respectively were  spoton  with  our  estimates,  but  10%  above  consensus’  numbers.  EBITDA margins during the period  remained  steady at 52.4% vs 52.9% in FY12 as the lower average fuel cost per container box  offset  overall costs. Its 10% y-o-y revenue growth was  driven by higher container (+8.3% y-o-y) and  conventional  cargo  (+4.2%  y-o-y)  volume,  which  accordingly  lifted EBITDA  by  9%  y-o-y.  Box  volume,  however,  exceeded  our  projected growth of 6% y-o-y. As expected, WPRTS saw a tax credit on investment allowance for capex spent,  which will continue to last  through  FY14.  A dividend of 5.22 sen was also announced.
• Briefing  takeaways.  The  P3  alliance  has  not  made  any  progress  in obtaining  regulatory  approval.  Management  said  that  CMA,  its  major customer, has  indicated  that  the number of boxes to be diverted to Port of Tanjung Pelepas  as  a result  of  the P3 alliance  would  be about  100k TEUs  in  FY14  and  200k  TEUs  in  FY15.  This  is  minimal  vs  WPRTS handling volume of 7.5m TEUs in FY13. CMA  also  intends to offset the diverted  cargo  by  expanding  into  the  non-P3  services  trade  lanes.  Its second and third largest clients are also looking to expand  their services in light of the recovery in global trade. Management is targeting growth of high  single-digit  vs  our  conservative  forecast  4%,  after  factoring  in  the assumption that the P3 alliance will commence by mid-2014.
• Raising  forecasts  and  FV.  Maintain  BUY.  We  nudge  up  our  FY14 volume assumption to 7.83m from 7.63m (at  a  5% y-o-y growth) in view of the expected minimal impact of the P3 alliance, since measures are in place to mitigate  it. As such,  our earnings  forecasts  for FY14 and FY15 are  nudged  up  by  2%  annually.  Our  DCF-derived  FV,  based  on  an unchanged WACC of 7.12%, is nudged up to MYR2.91 (from MYR2.84). Maintain BUY.

Financial Exhibits

SWOT Analysis

Company Profile
Westports Holdings Berhad is a leading terminal in Port Klang with a 69% market share of the total container throughput

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Source: RHB