KUALA LUMPUR: MIDF Amanah Investment Bank Bhd Research has maintained its buy call on Westports Holdings Bhd with an unchanged target price (TP) of RM4.82.
In a note on Jan 2, the research house said it favoured Westports based on two reasons: firstly, the lower transshipment tariffs among its peers, such as Port of Tanjung Pelepas and Port of Singapore even after taking into account of the second phase of tariff hike in March 2019.
“Secondly, the extension of the Ocean Alliance to 10 years (initially five years) until 2027 will mitigate the effects from the reshuffling of alliances seen in the financial year ended Dec 31, 2017,” it said.
According to MIDF Research, the company’s contribution from intra-Asia trade lanes would continue to remain robust underpinned by Asean’s economic growth of more than 4% in 2020 based on International Monetary Fund’s latest projections.
Besides, it said further upside on container throughput could come from a potential trade deal between the United States and China.
“On a longer-term horizon, Westports 2 expansion plan is still expected to increase capacity by roughly 50% to approximately 28 million twenty-foot equivalent units (TEUs) per annum by 2040.
“This would allow Westports to compete more effectively for transshipment volumes against Ports of Singapore, which has plans to raise capacity from around 40 million TEUs to 65 million TEUs by 2040,” it added.
In September last year, Westports announced its total container throughput was expected to grow by 13-14% year-on-year (yoy) to 10.80 million TEUs in FY19.
Commenting on that, MIDF Research said this was the largest annual growth in container throughput ever recorded for Westports since its listing.
“We believe that FY19 earnings will follow suit to increase further. As such, we expect FY19 earnings to grow by more than 10% yoy and breach the RM600 mil mark,” it said.
At 10.37am, Westports shares were unchanged at RM4.21. – Jan 2, 2020, Bernama
