Westports Holdings Bhd
(Oct 17, RM3)
Maintain buy with target price of RM3.30: Last week, Simon Whitelaw, the managing director of CMA CGM Malaysia Sdn Bhd, briefed investors on CMA CGM’s operations and assess the likely impact of Ocean 3 (O3) on Westports.
Three key highlights: (i) regulatory approvals could be swift and O3 is expected to commence by end-2014; (ii) the potential incremental volume to Westports upon the commencement of O3 is approximately 800,000 twenty-foot-equivalent units (TEUs) per year, fuelled by the transfer of boxes from Port of Tanjung Pelepas (PTP) and PSA Singapore Terminals to Westports and organic growth; and (iii) the three O3 partners will only collaborate on operational terms and not tie up in negotiating for lower charges from Westports.
Elsewhere, 2M (the alliance between Maersk Line and Switzerland-based Mediterranean Shipping Co) will commence in early-2015 and may transfer the bulk of its 300,000 TEUs transhipment boxes at Westports to PTP (2M’s hub). Hence, the net increment from both O3 and 2M to Westports could be 500,000 TEUs in 2015. Coupled with organic growth from the other liners, Westports should track to our projected volume growth of 750,000 TEUs (or 9% year-on-year) for 2015. Management’s volume growth expectation for 2015 is 5% to 10%. The capacity increase is earlier than our expectation by two years — Maybank IB Research, October 17
This article first appeared in The Edge Financial Daily, on October 20, 2014.