• Still NEUTRAL, new DCF-derived MYR4.70 TP from MYR4.56, 5% upside with 5% FY25F yield. Westports' FY24 results beat expectations, on the back of higher rental revenue and lower operating expenses. Management is guiding for mid-single-digit volume growth this year, which is to be mainly contributed by the increased gateway volumes. However, we think that upside potential on its share price is limited, as this counter remains fairly valued, ie it is trading at the historical mean.
• Outperforms expectations. 4Q24 core net profit of MYR266m (+16.7% QoQ, +28.6% YoY), bringing full-year earnings to MYR902m (+15.8% YoY) - which are above our (106%) and Street (108%) estimates. The deviations were mainly due to higher-than-expected rental revenue and lower-than-expected operating expenses. Segment-wise, 4Q24 container turnover rose 11% YoY to MYR511m despite flattish volumes, thanks to higher storage revenues from stringent customs control. This led to longer storage times. Consequently, revenue/TEU rose 7% YoY. On the other hand, conventional revenue grew 7% but volumes fell 8% due to a favourable product mix.
• 4Q24 throughput analysis. Westports managed a total of 2.9m TEUs (+6% QoQ, flattish YoY) in 4Q24, with transhipment volume down 2% YoY, offset by a 3% increase in gateway volumes. As a result, container volume handled in FY24 was 11.0m TEUs, with a transhipment: gateway split of 55:45. This was in line with our full-year FY24 container assumptions. Geographically, intra-Asia trade remains the biggest contributor (c.65% of total container volumes) despite recording a slight drop of 3% in 4Q24. However, this was partly offset by a recovery in Asia-Europe routes which grew by 21% YoY.
• Outlook. Despite the smouldering geopolitical risks, we anticipate a pick-up in its container handling revenue in 2025, with container volume forecasted at 11.9m TEU, vs management's target of 11.5m TEU. This would then be offset by lower value-added services contributions due to lower storage revenue. However, the risk of new targeted tariffs imposed by the US may put China companies' expansion plans in Malaysia on hold. However, management noted that announcement regarding tariff hikes as well as its implementation timeline is due this quarter, with no further details given. We keep our tariff assumptions unchanged for now.
• Keep NEUTRAL. We lift our FY25-26 earnings forecasts by 7-8% to include upward adjustments on rental revenue estimates and lower operating expenses. Our TP is now MYR4.70, post annual upkeep adjustments, with a 2% ESG premium imputed, based on its ESG score of 3.1. RHB Economics maintains its optimistic outlook for Malaysia's trade in 2025. However, we keep our NEUTRAL call as Westports is fairly valued at an implied FY24 P/E of 15.7x - in line with its historical average. Downside risks: Lower-than-expected TEU volume and higher-than-expected operating costs.

Source: RHB Research - 24 Jan 2025