KUALA LUMPUR: Kenanga research has maintained its market perform rating on Westports Holdings Bhd with an unchanged target price of RM3.75.
Following a meeting with Westports' management, the research house said its remains neutral on its near to medium-term prospect with an unchanged throughout growth assumption of 5%.
It noted a lack of near-term earnings catalysts but views Westports as a longer-term prospect.
According to Kenanga, Wesports is expanding its Westports 2, which is expected to be executed in three phases.
It said the land reclamation for Phase 1 will likely commence from FY20 onwards with capex of RM3bil to RM4bil based on preliminary estimations.
"We reiterate our view with Westports 2 expansion to be a longer-term prospect with full completion by 2040.
"As such, we rule out any earnings accretive development over the next two years," it said.
Kenanga added that Wesports is constructing a new liquid bulk jetty on 33 acres of land, which is expected to have a capex of about RM70mil with construction to begin earliest in 2H19 and operations in FY21.
"Though the impact is expected to be insignificant, this will contribute to WRPTS’ conventional segment, which historically took up 7-8% of the group’s total revenue and rental revenue, which historically took up 2-3% of the group’s total revenue," it said.
Following an exceptionally strong throughput growth of 12% year-on-year in 1Q19, Westports has maintained its container throughput guidance of 3-8% for FY19.
Management said growth levels are expected to taper from 2H19 onwards due to the higher base effect from 2H18 and minimal impact from the trade war as it is more likely to impact the Asia-America trade route.
"As such, we made no changes to our FY19-20E throughput growth assumptions of 5-5%," said Kenanga.
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