Westports Expecting Decline In Volume

The analyst firm says the key downside risks for Westports are a reduction in transhipment calls as shipping lines focus on routes that yield higher rates and a potential decline in global container volume as inflationary pressure could affect consumption.

Westports Expecting Decline In Volume
Photo: Westports

sssAnalysts lowered Value-Added Services assumption as it is expected to taper off in 3QFY22 and have lowered container volume assumption as Westports Holdings management expects a slight decline this year (previously flattish).

"We have made some changes to our estimates to reflect our latest view on Westports. FY22E/FY23F/FY24F core PAT were revised down to RM551.2m (-14.6%)/RM702.2m (-9.7%)/RM770.3m (-9.6%).

Assuming a flat volume for 2HFY22, we expect Westports to handle 10m TEUs (-3.9%yoy) in FY22E, before staging growth of 10.4m TEUs (+3.9%yoy)/10.9m TEUs (+4.8%yoy) in FY23F/FY24F.

"Our fuel costs estimates are also higher at -RM190.2m/- RM140.6m for FY22E/FY23F. We still maintain our BUY call, but with a revised DCF-derived TP of RM4.00 (WACC: 7%, g: 2%) (from RM4.45)," says MIDF.

The analyst firm says the key downside risks for Westports are a reduction in transhipment calls as shipping lines focus on routes that yield higher rates and a potential decline in global container volume as inflationary pressure could affect consumption.

Dire Economic Consequences From Generation Endgame Bill
According to Pankaj, even business owners, body corporates, and companies too can be held liable for various offences, which could have severe repercussions on investors’ confidence in doing business in Malaysia.

Transhipment volume drop

Higher VAS contribution uplifted the operational revenue to RM1.03b (+4.3%yoy), despite the container throughput declining to 4.88 TEUs (-8.1%yoy) in 1HFY22.

Transhipment volume dropped to 2.97 TEUs (-12.4%yoy), while gateway was flat at 1.91 TEUs. PBT fell to RM468.7m (-8.0%yoy) owing to the surge in fuel cost which made up 23% of the cost mix (1HFY22: 15%).

Core PAT of RM313.9m (-13.9%yoy) saw a significant decline because of prosperity tax. Note that there was a RM20m insurance reimbursement in 1HFY21 which we have excluded in deriving the core earnings.

Maintain BUY

MIDF says it maintains a BUY call on Westports.

"We still maintain our BUY call, but with a revised DCF-derived TP of RM4.00 (WACC: 7%, g: 2%) (from RM4.45)."