KUALA LUMPUR (June 23): Hong Leong IB Research has initiated coverage on Westports Holdings Bhd at RM4.27 with a “Buy” rating and target price of RM5.03 and said Westports was listed on Main Market of Bursa Malaysia on October 2013 as port operator and commands 76% market share for container throughput at Port Klang.  

In a note today, the research house said 83% of revenue comes from container business, 9% from conventional and the rest from marine and rental while utilisation rate has been fairly stable at 75%.

HLIB Research said that currently, Westports has capacity to handle 11 million TEUs (twenty-foot equivalent units) and construction works has begun for CT 8, which upon completion total capacity will be 14m TEUs.

“Our investment thesis includes (1) expansion plan to drive earnings growth; (2) extension of ITA for CT 8 and CT 9; (3) strong cash flow and dividend payout ratio; and (4) potential tariff hike.

“We like the company business model — sustainable recurring yet growing income with 3-Year CAGR of 11.9% on CT 7 to CT 8 expansion, decent for port operator. Based on our DCFE valuation, we have derived a fair value of RM5.03 and initiate coverage with Buy recommendation,” it said.