KUALA LUMPUR (Aug 7): AllianceDBS Research has downgraded Westports Holdings Bhd to “hold” from “buy” with the target price (TP) being trimmed to RM4.40 from RM4.55 previously, despite the Ministry of Transport’s approval for the container tariff hike for Port Klang.

Westports fell 9 sen or 2.12% to RM4.15 in early trades this morning, giving a market capitalisation of RM14.46 billion.
 
The ministry had yesterday said the hike will be implemented in two phases, with a 15% hike effective next month, and another 15% hike effective Sep 1, 2018.
 
“Although this is broadly in line with our forecast of a 30% hike (previously expected to be effective Jan 1, 2016), we had not anticipated the two-stage hike which is a slight dampener,” said the research house in a note today.
 
With the announcement of the hike, AllianceDBS said it has revised upwards its forecasted earnings for Westports (fundamental: 1.45; valuation: 0.9) for FY15 by 4% due to the earlier-than-expected hike, but had cut FY16 and FY17 earnings by 10% and 13% respectively.
 
“We reduce our TP to RM4.40 based on sum-of-parts valuation, as the revised rates will only be 15% higher during our forecast period (instead of 30%).
 
“We still like the stock as a proxy to the ASEAN growth story, but we downgrade Westports to ‘hold’ because of limited upside to our target price,” said the research house.
 
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

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