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PETALING JAYA: Despite persistent challenges in global trade, Westports Holdings Bhd
will be able to navigate through them, according to Maybank Investment Bank (Maybank IB) Research.
The port operator’s mid to long term prospects remained supported by rising foreign direct investments in Malaysia and continued intra-Asia trade growth potential, said the research house.
“Westports’ second quarter 2023 (2Q23) container throughput grew 8% year-on-year (y-o-y) and we expect this growth momentum to sustain into 3Q23, to meet our 6% y-o-y increase for the financial year 2023 (FY23),” Maybank IB said in a report.
The research firm said 3Q23 profitability could be weighed down by higher operating costs, including labour and fuel costs.
Additionally, higher electricity cost will impact bottoml ine.
It notes that labour, fuel and electricity costs made up 34%, 18% and 7% of operating expenditure respectively in first half of 2023 (1H23).
Although Maybank IB Research is maintaining its earnings forecasts for Westports, it has upgraded the stock to a “buy” as value has emerged with a total upside of over 10%, following the recent share price decline.
Westports’ net gearing of 0.15 times at end-FY22 provided ample debt headroom, while its strong free cash flow of around RM800mil per year reduces the possibility of sizeable dilution in potential equity call to fund Westport 2.0, which is estimated to cost about RM1bil initially in capital expenditure.
It said the proposed Pulau Carey port development under Budget 2024 would not cannibalise Westports.
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