KUALA LUMPUR: Analysts are of the view that the 15% container tariff hike announced by Westports Holdings Bhd yesterday, while a definite long-term positive factor for the port operator, will have minimal impact on its earnings for the current financial year ending Dec 31, 2015 (FY15).

This is because Westports is likely to only start recognising the full earnings contribution from the rate hike in the next three to four years.

“I don’t think Westports can realise the contribution [from the rate hike] anytime soon,” an analyst with a local broker firm said, as most of Westports’ ongoing contracts, including trans-shipment jobs, will only expire in the next two or three years.

Another analyst with a local research house expects Westports’ earnings to be better going forward - though not FY15 - and noted that the rate hike will also benefit NCB Holdings Bhd, the Northport operator.

“We had earlier expected the rate hikes to be announced by the end of this year, and Westports and Northport to start implementing the tariff hike for local boxes as early as before April next year,” she said.

Most are of the view that Westports’ current share price has already factored in the rate hikes. The stock has been on an uptrend recently, climbing to an all-time high of RM4.50 on April 30, compared with its initial public offering price of RM2.50. It was first listed on Oct 18, 2013.

Year to date, the stock has gained 88 sen or 26.19%. It closed at RM4.24 yesterday, up five sen or 1.19% from Wednesday’s close, with a market capitalisation of RM14.45 billion.

Westports told Bursa Malaysia yesterday that the Transport Ministry had approved its 15% container tariff hike that would take effect on Sept 1 (first phase), and that a

second-phase tariff hike of 15% would follow on Sept 1, 2018.

The revised tariff covers container terminal handling charges for import, export, trans-shipment, shifting and restow, storage charges for containers, and handling charges for heavy lift or non-containerised cargo.

In a note to clients on Monday, AmResearch said it had incorporated a 15% tariff hike in gateway container traffic for Westports, leading to a 12% to 13% rise in its earnings forecast for the latter’s FY16 (net profit: RM619.6 million; revenue: RM1.88 billion) and FY17 (RM603.3 million; RM1.96 billion).

On whether the tariff hike will adversely afffect Westports’ competitiveness, analysts said its revised charges would still be lower compared with regional peers.

“Port cost is not the main priority for shippers. For them, the location and the effectiveness of the ports are the main concerns,” one analyst said.

According to Westports’ filing yesterday, the container tariff revision has been approved and was gazetted on June 12 and on Monday.

“The revised tariff covers many components, and the phased implementation is to ensure that sufficient notice has been given to industry players to realign their processes,” said Westports.

“The tariff revision is crucial to ensure the future growth of Port Klang, which has always been supply-driven on terminal facilities and expansion. Port Klang was ranked the world’s 12th busiest port in 2014. It will remain as one of the most efficient and competitive ports in the region,” it added.

The last revision of the key container tariff items at Port Klang was about 14 years ago, it noted.

This article first appeared in digitaledge Daily, on August 7, 2015.