KUALA LUMPUR (Oct 10): MIDF Research said Westports Holdings Bhd (KL:WPRTS) is expected to record a low-single digit increase in container volume for the fiscal year 2024 (FY2024), resulting from the Red Sea crisis.

In a note on Thursday, MIDF estimates that container volume in the second half of FY2024 will rise by 2.2% year-over-year, supporting the full-year growth target of 4.2%.

MIDF maintained a neutral stance on Westports, with an unchanged target price of RM4.30.

For the remainder of the year, the house expects the contribution of gateway volume to remain in the 40% range, an increase from the historical 30%.

“Note that 2HFY2023 had a high base for gateway containers, due to competitive local currency and foreign direct investments that resulted in containerised exports.”

However, challenges persist, particularly in the Asia-Europe transshipment sector, which is expected to remain weak due to irregular vessel calls and blank sailings caused by the Red Sea crisis.

Intra-Asia trade lanes, which historically accounted for over 60% of Westports’ total volume, are projected to continue driving growth, with an anticipated increase of 6.5% year-over-year during the same period.

This growth is primarily attributed to the gateway volume, as carriers have reportedly restructured services to prioritise the Asian region, driven by their overall strategy rather than in direct response to the disruption.

Despite potential reductions in scheduled container vessel calls due to rerouting related to the Red Sea situation and regional congestion, Westports has benefitted from an influx of ad-hoc calls.

This trend is expected to persist, similar to neighbouring Northport, which received 171 ad-hoc calls from January to August 2024.

Container yard occupancy at Westports peaked at 100% in June 2024, but has since declined to approximately 75%.

This occupancy rate, while lower, remains above the ideal 65% recorded in December 2023, suggesting that revenue from value-added services may continue to be strong in the third quarter of FY2024, even as it normalises.

At the time of writing on Thursday, Westports shares were down two sen or 0.5% at RM4.18, with a market capitalisation of 14.3 billion.