Westports Holdings Bhd
(Nov 12, RM3.65)
Maintain hold with an unchanged target price of RM4.01: Westports Holdings Bhd reported higher earnings before interest, taxes, depreciation and amortisation (Ebitda) of RM724 million for the nine-month period ended Sept 30, 2018 (9MFY18) on the back of higher container volume. However, the group’s core net profit fell 11% year-on-year to RM384 million on higher depreciation and finance costs following the completion of container terminal 8 (CT8) and CT9 facility expansion in 2017.
Overall, the results are within our and market expectations — 9MFY18 core net profit accounted for 74% of street’s and 76% of our full-year forecasts. Sequentially, Westports’ third quarter of FY18 core net profit grew 16% to RM139 million on the back of higher revenue, attributable to a higher container volume of 2.45 million twenty-foot equivalent units (TEUs) — transhipment volume grew 10% quarter-on-quarter to 1.43 million TEUs, while gateway volume was 6% higher at 810,000 million TEUs.
Management gave a modest 2019 throughput growth guidance of 3% and 8%, citing trade tensions between the US and China. Elsewhere, management does not expect further delays in the container tariff revision.
Recall that Port Klang Authority has deferred the impending container tariff revision by six months to March 1, 2019 instead of Sept 1, 2018 to allow port users and other industry players to adapt and stabilise their businesses after the sales and services tax was implemented on Sept 1, 2018.
We have raised our 2018 to 2020 estimated earnings per share by 0.1% and 2%, incorporating the Malaysian Financial Reporting Standard 15’s (MFRS 15) impact and the latest financial results. To recap, Westports has adopted the MFRS 15 and now recognises revenue net of rebates, resulting in lower revenue, lower operating costs and a higher Ebitda margin. The accounting changes’ net impact on Ebitda is however minimal. — Affin Hwang Capital Research, Nov 12