Research firms optimistic about Westports’ prospects
Published on: Monday, February 05, 2024
By: Bernama
Kenanga Research has set a ‘market perform’ call on Westports Holdings Bhd, maintaining the target price at RM3.80 per share. (Bernama pic)
PETALING JAYA: Research houses expressed optimism about Westports Holdings Bhd (Westports)’s outlook, pointing to its strong financial performance for the fiscal year ending Dec 31, 2023 (FY2023).
The port operator’s net profit rose 11.4% to RM779.43 million for FY2023 compared with RM699.58 million in FY2022.
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On that account, Kenanga Research has given a “market perform” call on Westports, maintaining the target price (TP) at RM3.80 per share.
In a statement, the research house said it maintained its guidance for a low single-digit container volume growth rate in the financial year 2024 (FY2024) as it believes the Middle East conflicts, if prolonged, would weigh on the Europe-Asian trade.
It liked Westports for its resilient earnings, underpinned by long-term contracts with key clients such as Ocean Alliance; its long-term growth prospect driven by the Westports 2 expansion project; and its price competitiveness such as lower transshipment tariffs versus peers such as Port of Tanjung Pelepas, Johor and Port of Singapore.
However, the research house noted that the upside to the group’s share price is limited after the recent run-up in its share price.
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“Risks to our call include a significant slowdown in the global economy, dampening the global containerised trade traffic; rising operating costs, particularly fuel; and its expansion plans and tariff revision failing to materialise,” it said.
Meanwhile, MIDF Research has maintained its “buy” call for Westports with a TP of RM4.30, adding that the stock currently trades at a 20% discount compared to its five-year historical mean.
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“In the absence of a recession and the possibility of monetary policy easing in major economies, improved Western consumption may boost interregional container movements,” MIDF stated in a statement.
The research house also predicted the Red Sea crisis to have a minimal impact on Westports, anticipating only potential delays in capturing volume due to rerouting rather than an actual loss in volume.
It noted that the key downside risks include weaker-than-expected container throughput and the continued appreciation of the US dollar, potentially impacting fuel costs.
As at 12.29pm, Westports’ share price was up by 11 sen or 2.91% at RM3.89, giving it a market capitalisation of RM13.26 billion.
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