Khazanah disposes of 4.74% stake in Westports

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Westports Holdings Bhd
(Nov 3, RM2.98)
Maintain “hold” with unchanged discounted cash flow (DCF)-derived fair value of RM2.91:
Khazanah Nasional Bhd has disposed of its 4.74% stake in Westports Holdings at an average price of RM2.90 per share.

The Star reported that a total of 161.52 million shares were transacted in an off-market deal last Friday, equivalent to the number of shares owned by Khazanah. The was report said that the transaction was carried out via a book-building exercise. It was reported earlier that Khazanah was looking at divesting the stake, in line with its policy of divesting non-strategic investments.

We are “neutral” on Khazanah’s exit.

Westports’ prospects have picked up on news that three main line operators — CMA CGM Group SA, China Shipping Container Lines Co Ltd and United Arab Shipping Co, have formed a route-sharing alliance known as Ocean Three (O3).

The alliance, which is expected to be functional by year-end, is positive news for Westports, which already serves all the three international liners. The three liners reportedly accounted for about 30% of container throughput at Westports in financial year of 2013 (FY13) and that is expected to increase with the implementation of the O3 Alliance.

This is a significant change in fortunes for Westports from the beginning of this year when uncertainties revolved around the now-aborted proposed P3 Alliance that would have threatened to negatively impact throughput at the port.

The now proposed O3 alliance would cover routes between Asia and Europe, as well as Asia and North America. CMA-CGM is the world’s third largest container liner, behind Maersk and Mediterranean Shipping Company SA.

For now, we maintain “hold” on Westports, with an unchanged DCF-derived fair value of RM2.91 per share, pending a meeting with the management. — AmResearch Sdn Bhd, Nov 3

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This article first appeared in The Edge Financial Daily, on November 4, 2014.