Westports up 1.54% on firm 2Q earnings, higher target price

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KUALA LUMPUR (July 29):  Shares in Westports Holdings Bhd rose 1.54% this morning after its second quarter ended June 30, 2019 net profit jumped 36.5% to RM166.32 million, from RM121.81 million a year ago — with revenue increasing 15.3% to RM454.5 million from RM394.04 million.

At 9.21am, Westports added 6 sen to RM3.95 for a market capitalisation of RM13.47 billion.

The group attributed the higher revenue to double-digit growth in container volume and the implementation of the container tariff hike (which was implemented on March 1, 2019).

Meanwhile, Affin Hwang Capital Research downgraded Westports to “Hold” at RM3.89 with a higher target price of RM4.22 (from RM4.20) and said Westports reported a solid set of results – 6M19 core net profit grew by 25% year-on-year to RM307 million on the back of higher revenue (+12%), driven by a 17% increase in container volumes.

In a note today, the research house said management now expects its 2019 container volumes to grow by high single digits (previously 3-5%).

It said overall, the earnings were within consensus and our forecasts, despite the higher-than-expected container volumes.

“We are tweaking our FY19-21E earnings forecasts by 0.1-1.4% and revising our DCF-derived price target to RM4.22 (from RM4.20).

“We downgrade Westports to Hold from Buy given the lower share-price upside following its recent run.

“At 20x 2020E PER, Westports now trades near its 5-year average forward PER of 21x, which looks fair,” it said.