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KUALA LUMPUR: Westports Holdings Bhd’s earnings for the first half ended June 30, 2015 (1HFY15), came in within expectations of analysts.

They also see the much-touted container tariff hike that may be announced in the next few months to have a limited impact on the future earnings of the company.

In a note to clients yesterday, TA Securities said although Westports’ 1HFY15 core earnings of RM242.2 million reached 43% of the research firm’s full-year forecast and 45% of consensus estimates, it considered the results within expectation as 2HFY15 earnings are expected to be seasonally stronger than 1HFY15.

“1HFY15 net profit grew 4.1% to RM242.2 million on the back of 6.3% surge in port revenue. The increase in revenue can be attributed to higher container throughput with trans-shipment and gateways volume increased by 10.9% and 7.7% respectively,” it added.

However, the research firm said the company’s 3% growth in container throughput in second quarter ended June 30, 2015 (2QFY15) was due to market share win by Westports instead of higher trade between Asia and Europe.

This was due to the Ocean 3 alliance — between CMA CGM S A, China Shipping Container Lines and United Arab Shipping Co — which has been bringing more volume from Port of Tanjung Pelepas in Johor to Westports.

MIDF Research said although Westports’ operational cost increased 2.8% year-on-year, the company had recorded a 26% reduction in fuel cost from lower diesel prices.

The research firm also said Wesports’ tax rate was 24.7% as the investment tax allowance granted by the government expired in FY14, and the company expects the tax rate to remain until an extension is granted.

On the tariff hike, Westports had reiterated that it is confident that a container tariff hike will be implemented this year, saying the hike could be at 10% to 30%.

TA Securities said although the tariff hike is positive on the company’s import and export container revenue, the impact on trans-shipment could be muted as the group may offer greater rebate to remain competitive.

MIDF Research said the hike would only benefit the gateway container segment, which makes up about 30% of container volume, while the trans-shipment segment is subject to negotiations with shipping lines.

AmResearch also said the impact of the tariff hike is still unclear as trans-shipment containers are subject to long-term contracts with shippers.

However, it noted that there is further upside to its fair value of Westports, as the company has also appealed for another five-year round of investment tax allowance that would lower its tax expenses.

AmResearch has upgraded its call on Westports to “buy” from “hold”, with a higher target price of RM4.87 per share from RM4.35 per share, based on the

expectations of a tariff hike.

However, TA Securities has maintained its target price of RM3.89 per share with its “sell” recommendation on the stock’s expensive valuation, while MIDF Research has maintained its “neutral” call with a target price of RM4.40 per share on the stock.


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. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in digitaledge Daily, on August 4, 2015.

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