With 9M14 core earnings at 75% of our FY14 forecast, we deem numbers within our estimates. Maintain BUY and DCF-derived MYR3.29TP  (WACC: 6.76%), a 13.5% upside.  Core earnings grew by 18.7% YTDon  the  back  of  a  throughout  and  revenue  growth  of  12-13%  YoY. Westports  will  kick  off  its  CT8  expansion  in  early  2015,  which  is expected to increase TEU handling capacity to 13.8m (from 11m now)

Within  our  estimate  but  ahead  of  consensus.  With  9M14  core earnings at 75% of our  FY14 frecast, we deem the  numbers within our estimates but exceeding consensus.  The core  earnings  grew by 18.7% YTD  on  the  back  of  a  YTD  revenue  and  throughout  volume  growth  of 12.7%  and  12.2%  respectively.  As  a  result  of  the  higher  throughout base,  economies  of  scale  improved.  This  resulted  in  a  YoY  EBITDA margin improvement of 0.3ppts to 53.1% YTD. 

Throughput  grew  by  double  digits.  Westports’  throughput  came  in slightly  better  than  we  anticipated.  For  9M14,  it  raked  in  12.2%  YoY growth  in container boxes  (3Q14:  up  11.3% YoY), ie  ahead of our  8% YoY  FY14  projection.  There  is  scope  for  an  upward  revision  to  our earnings  pending  today’s  analysts  briefing.  Note  that  we  have  not factored  in  any  contribution  from   the  Ocean  Three  alliance. Conventional cargo grew 11.8% YoY in 3Q14,  largely driven by clinkers and  coal.  For  9M14,  conventional  volume  came  in  flattish,  posting  a 0.5%  YoY  increase  only.  This  was  due  to  lower  liquid  (due  to  lower bunker purchases  and palm oil exports) and break volume (due to lower imports of infrastructure-related projects). Container trade flows for 9M14 remained  encouraging,  with  all  showing  positive  growth.  Asia-Europe trade, which accounts for 23% of throughput, surprisingly grew 17% YoY in 3Q14 (2Q14: 9.7% YoY), showing the strongest performance.

Confirming  its  CT8  expansion.  Westports  will  kick  off  its  CT8 expansion,  with  construction  set  to  commence  in  early  2015  and  end mid-2017 (2 phases: Phase  1 ready by 2016 and Phase 2 by mid-2017).This will increase  twenty-foot equivalent unit  (TEU)  handling capacity to 13.8m from 11m. The total capex is MYR1bn (MYR400m in 2015). 

Forecasts. Maintained pending today’s analysts briefing. 

Maintain  BUY.  We  maintain  our  BUY  call  and  DCF-derived  MYR3.29TP, which is based on a WACC of 6.76%.

Source: RHB