PETALING JAYA: The lack of spare capacity could put Westports Holdings Bhd
at a slight disadvantage amid the sporadic global port congestion.
As it is, Westports had already seen a loss of market share to two major Straits of Malacca ports, namely, Port of Singapore (PSA) and Port of Tanjung Pelepas (PTP), in the first quarter of 2024 (1Q24), UOB Kay Hian (UOBKH) Research said.
“Our findings that Westports’ loss of market share in 1Q24 to PTP and PSA, alongside PSA’s recently reactivated defunct terminals appear to support our theory that Westports’ lack of spare capacity is a small competitive disadvantage, amid sporadic global port congestions which have worsened quarter-on-quarter (q-o-q),” the brokerage explained.
“As a recap, Westports does not have near-term spare capacity until the CT10 to CT13 terminals (that is, the first phase of Westports 2) are completed around 2027,” it added.
Data showed Wesports registered a q-o-q market share decline from 17.3% to 16.4% in 1Q24 (1Q23: 17.4%) within the Straits of Malacca, as its transshipment volume declined q-o-q by 10%.
This was despite the group retaining its Port Klang market share at 77%.
“Given actual evidence of loss of market share in 1Q24 port statistics that support our theory of Westports having a small competitive disadvantage in a sporadic port congestion scenario, we cut earnings forecast by assuming lower volume forecasts and higher operating expenditure (that is higher lashing costs),” UOBKH Research said.
It cut its earnings forecast for Westports by 11% for the financial year ending Dec 31, 2024 (FY24), 5% for FY25 and 4% for FY26.
As such, it lowered its target price for Westports to RM3.80 from RM3.95 previously.
It retained its “hold” recommendation on the company’s shares.
UOBKH Research said 2024’s port congestions were highly sporadic due to various geopolitical and climate change event.
“This ‘perfect storm’ caused vessel bunching, as ships had to re-route schedules to reduce voyage distance, which consequently created multiple vessels arriving at the same time, and longer dwell times,” it said.
It noted that the Port Klang Authority manager said that for April 24, the average berthing delays in Westports was severe at 9.3 hours, as ships discharged more containers, which drove up container and yard density at the port.
Meanwhile, UOBKH Research said the recent fire engulfing 14 containers at Westports terminal was unlikely to pose a material financial risk on Westports.
“If there is a fire incident on a ship, the insurance risk can be shared by all parties via ‘salvage agreements’ or ‘General Average’.
“However, if Westports has to bear all the damages, we are concerned it may affect its business amid these port congestions,” UOBKH Research explained.
“Also, a new smart artificial intelligence port may be developed by Tanco Holdings and China Dredging at a RM2bil cost on a premium 480-acre landbank owned by Tanco in Dickson Bay.
“Although Tanco may not have a track record in ports, it may apply a conglomerate business growth direction similar to MMC Corp Bhd and its port assets,” UOBKH Research added.
It further noted that this could also put pressure on Westports’ competitive advantage.
