KUALA LUMPUR: Port Klang, comprising Northport and Westports, is likely to see a tariff hike this year, which will be one of the key catalysts for Westports Holdings Bhd’s share price in 2015, said CIMB Research.
When contacted, Westports chief executive officer Ruben Emir Gnanalingam told The Edge Financial Daily that the Port Klang Authority (PKA) had submitted a proposal to the Transport Ministry for the port tariff to be reviewed last year.
The tariff rates in Port Klang are set by the Transport Ministry and regulated by the PKA.
“We actually don’t have much clarity [on whether or not the much-awaited tariff hike will be announced] at the moment,” said Ruben, noting that the last tariff review was in 2002.
“Some [of the port charges have not been reviewed] even longer. As such, it [a hike] is definitely due,” he said. There are different charges for different types of boxes, such as 20-foot boxes, 40-foot boxes, 45-foot boxes, refrigerated boxes, storage charges or transshipment.
“I am sure the ministry is looking into it carefully and will come back to us when they have completed their review. Until then, anything we say would be pure speculation,” said Ruben.
NCB Holdings Bhd group managing director Abi Sofian Abdul Hamid concurred, adding that Northport, on its part, had submitted the necessary documentation to the PKA to support the tariff hike.
“A tariff hike will be good for us, although industry observers may say that we are passing on the cost to them,” he told The Edge Financial Daily yesterday. “To date, there has yet to be any update on the status of the tariff hike.”
Still, an industry source said the government is unlikely to push through plans to increase the tariff this year given the plummeting crude oil prices and the devastation caused by the floods.
“The government may not be in favour to push it for the time being, although both the terminal operators have been lobbying for a tariff hike as that could significantly improve their earnings,” the source said.
In a sector report dated Jan 7, CIMB Research said following its visit to Northport last month, the latter’s management said a 20% tariff hike was insufficient given that rates were only increased every 10 to 15 years.
“[Thus,] our view is that a 30% tariff hike is the most likely scenario,” said the reseach firm.
“We believe that Northport’s new 15.7% shareholder, MMC Corp Bhd, is likely to exert [a] positive influence to push the tariff hike through and this will be one of the key catalysts for Westports’ share price this year in our view,” CIMB Research said.
“Westports is in a strong competitive position in Port Klang, and we expect it to enjoy multiple catalysts to its share price this year, including a likely tariff hike, an increase in transshipment volumes from the start of the Ocean Three [shipping] alliance, and the high chance of getting a renewal of its investment tax allowance,” it noted.
CIMB Research said the Ocean Three alliance of CMA CGM, China Shipping and United Arab Shipping Co — Westports’ three largest customers — is on track for implementation from this month onwards.
CIMB Research is maintaining an “add” recommendation on Westports, with a target price of RM4.57.
Westports stock ended 10 sen or 3.03% higher at RM3.40 yesterday, giving it a market capitalisation of RM11.59 billion, while NCB shares were 12 sen or 5.08% higher to settle at RM2.48, bringing a market cap of RM1.17 billion.
This article first appeared in The Edge Financial Daily, on January 9, 2015.