KEY INVESTMENT HIGHLIGHTS

• 9MFY24 results met expectations
• VAS ratio rose to 24.6%
• Conventional cargo volume remains strong
• No changes to forward earnings estimates
• Maintain NEUTRAL with an unchanged TP of RM4.30

Within expectations. Westports Holdings Berhad (Westports) posted a core PAT of RM230.9m for 3QFY24, bringing the total to RM639.0m for 9MFY24. These results align with our forecasts and account for 76%/77% of our/consensus full-year projections.

Quarterly. In 3QFY24, a +8.7%yoy increase in gateway volume was largely offset by a -9.9%yoy decline in transshipment volume, driven by lower movement of empties. However, container revenue grew by +6.6%yoy driven by value-added services (VAS), with the ratio rising to 24.6% (2QFY24: 21.6%). Conventional revenue grew by +30.3%yoy, driven by a +22.0%yoy volume increase at the break and dry bulk segments. Overall, core PAT increased by +18.7%yoy. Sequentially, despite a decline in container volume (-1.1%qoq), core PAT rose by +13.3%qoq, thanks to the strong contribution from VAS in container revenue and solid growth in conventional volume (+14.0%qoq).

Outlook. Management expects FY24 container volume to end flat, as shifts in transshipment congestion and a subdued market conditions have dampened growth momentum. This is largely in line with our estimate of +1.2%yoy growth. They have guided for low single-digit growth in FY25, driven by strong gateway volume and recovery in transshipment volume, which we translate into a +3.3%yoy growth. Container volume could see a temporary rise if shipments are frontloaded in anticipation of trade tariffs following Donald Trump's presidential transition, though the impact will depend on the scope of the tariffs. Note that the China + 1 strategy has been a key driver of gateway volume growth, particularly from the paper, glass, and solar industries.

Maintain NEUTRAL. No changes have been made to our earnings estimates. Our DCF-derived target price remains unchanged at RM4.30 (WACC: 7.2%, g: 3%). The last closing price reflects a valuation of 16.0x FY25F EPS, which is close to its 5-year historical mean. Key potential upsides for the stock include the quantum of a tariff hike surpassing expectations or a positive revision in management's guidance for container volume growth.

Source: MIDF Research - 11 Nov 2024