PETALING JAYA: Port operator Westports Holdings Bhd
should be able to weather the challenging global trade outlook as a key beneficiary of trade diversion, analysts say.
It would be able to effectively manage its yards’ congestion issues with the significant hike in container storage charges and altered vessel traffic due to tensions in the Middle East, said Kenanga Research.
These factors and its resilient earnings, supported by long-term contracts with key clients such as shipping industry grouping Ocean Alliance, were taken into consideration when the research house upgraded its stock call from “market perform’’ to “outperform”.
Wesport’s bottomline will also be supported by expansion at Westport 2, the research house added.
It adjusted its net profit forecasts for Westports upwards by 2% this year and 4% next year.
It also raised its target price from RM4.80 a share to RM6 a share.
Westports’ long-term growth prospects will also be driven by the Westports 2 expansion project and its price competitiveness due to lower transshipment tariffs versus peers such as Port of Tanjung Pelepas in Johor and Port of Singapore.
The research house said the impact of the container handling charges ceiling hike would be realised immediately.
It added that this would be subject to volume-based discounts to maintain a competitive edge while transhipment cargoes will be realised based on contract negotiations, which could be staggered over one to year years from the approved ceiling rates hike.
Meanwhile, the research house said the increase in electricity costs set to take place this month would raise Westports’ power bill by around 10%
The port operator hopes to pass on the costs to clients of rental warehousing, but would absorb the higher cost of crane usage.
Based on the company’s electricity costs of RM54mil last year, an increase of 10% translates to RM5.4mil which is less than 1% of its earnings last year.
The price of fuel, the company’s third-biggest expenditure, may also rise due to the tensions in the Middle East.
Westports spent RM155mil on fuel last year.
The research house said the recently expanded sales and service tax will have a very small impact of about RM2mil to RM3mil for the port operator, related to its vendor-related activities.
