High single-digit volume growth seen for Westports

  • Corporate News
  • Wednesday, 31 Jul 2019

Positive guide: CIMB Research has maintained its ‘add’ call for Westports with a target price of RM4.18.— AFP

PETALING JAYA: Following the loss of a major customer during a major reshuffling of the global shipping alliances about two years ago, Westports Holdings Bhd is back on the growth path.

The seaport operator had recorded an exceptionally strong volume growth in the first half of financial year 2019 (1H19) and appears to be benefiting from trade diversion from the US-China trade war, especially for gateway volumes.

Following this, the group is now guiding a “high single-digit percentage” volume growth for financial year 2019 (FY19) as opposed to its guidance earlier this year of between a 3% and 8% volume growth.

Wesports’ second-quarter ended June 30 (2Q19) volume came in at 2.74 million twenty-foot equivalent units (TEUs) – a 22% rise year-on year (y-o-y) and 8% quarter-on-quarter (q-o-q).

CGS-CIMB Research said the strong volume growth was a positive surprise and believes that the guidance is probably too low, as growth volumes in 2H19 are typically higher than volumes in the first half.

“Hence, we have pencilled in 2H19 container volumes of 5.29 million TEUs and with 1H19 volumes at 5.27 million TEUs, the total FY19 forecast volumes of 10.56 million TEUs implies a 10.8% y-o-y growth, ” said the research house, which has maintained its “add” call with a target price of RM4.18.

According to CIMB Research, this suggests that Westports will see a port utilisation of 75.4% for FY19 out of an annual handling capacity of 14 million TEUs.

“At our forecast of 5% per annum volume growth in the years ahead, Westports could hit 81.5% utilisation by FY22, assuming an enlarged annual handling capacity of 15 million TEUs with the purchase of more quay cranes for Container Terminal 9 (CT9). This means that by end-FY22, waiting times for ships to berth may lengthen, and port congestion may become an urgent issue to address.”

AmResearch, meanwhile, has raised its container throughput volume growth assumption to 12% from 4%. This is underpinned by higher transshipment volumes backed by the buoyant intra-Asia segment that contributed about 63% of its total container throughput volume in 1H19 and trade diversion from the US-China trade war.

Going forward, the group is expected to benefit from the improved China-Malaysia relations.

China was one of Malaysia’s largest trade partners in 2018, contributing to 13% of Malaysia’s total external trade.

Despite the decent 1H19 performance, TA Research has downgraded the stock to a “sell” from a “hold”, as it still holds a belief that no one would benefit from the US-China trade war over the long run.

Shares in Westports closed eight sen higher to RM3.97 on Monday, giving the stock a market cap of RM13.5bil. The stock is up by 9.67% year-to-date.

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