Wesport Holdings / G. Gnanalingam

[winston]

Maybank reiterates ‘buy’ on Westports Holdings

KUALA LUMPUR: Maybank Investment Banking Research has reiterated its "buy" call on Westports Holdings Bhd with an unchanged target price of RM3.30 per share.


The research house said Westports would gain a net positive impact from the proposed Ocean Three alliance (O3).

Three of Westports' largest customers - CMA CGM, China Shipping Container Lines and United Arab Shipping Corp are forming a new shipping alliance (called the Ocean Three).

Maybank Investment Research said there was potential incremental volume accuring to Westports upon the commencement of the alliance.

"Potential incremental volume to Westports upon the commencement of O3 is approximately 800,000 twenty-foot equivalent units (TEUs) per annum, fuelled by the transfer of boxes from the Port of Tanjung Pelepas (Johor) and the Port of Singapore to Westports.

"The three O3 partners will only collaborate on operational terms and not tie up in negotiating for lower charges from Westports," the research firm said in a statement.

Coupled with organic growth from other liners, Maybank Investment Research said Westports should track its projected volume growth of 750,000 twenty equivalent units or nine per cent, year-on-year, for 2015.

Source: Bernama

[sschong92]

not vested

Strong earnings ahead for Westports, CIMB Research TP RM4.57
25 November 2014

KUALA LUMPUR: CIMB Equities Research expects Westports’ share price may be driven up in the months ahead by three potential catalysts.

The research house said on Tuesday the factors are:
i) the start of the Ocean Three alliance;
ii) the renewal of the Investment Tax Allowance, and;
iii) government approval to raise port tariffs.

“Westports is our top pick in the Malaysian transport space,” it said as it initiated coverage with an Add call and a probability-weighted discounted cashflow (DCF) target price of RM4.57, incorporating different scenarios of the timing and quantum of the tariff hike.

“We expect the core EBIT three-year CAGR of 10% to rise to 17% if port tariffs are raised 30% on Jan 1, 2016,” it said.

CIMB Research said the landscape of container carrier alliances has changed dramatically in favour of Westports.

The planned P3 alliance of Maersk, MSC and CMA CGM once threatened Westports’ transshipment volumes, but this threat was unexpectedly nipped in the bud by China’s regulatory rejection.

The alternative 2M alliance (Maersk and MSC) will have almost no impact on Westports, while Westports’ top three customers of CMA CGM, CSCL and UASC have decided to form the O3 alliance, which will only solidify their commitment to Westports as a transshipment hub at the expense of other hubs.

CIMB Research said once the 2M and O3 alliances begin in early-2015, Westports may enjoy at least a net 500,000 twenty-feet equivalent units (teu) step-up in transshipment volumes, 8% of its expected transshipment volumes in 2014, in addition to the usual organic growth.

The research house added there is no more uncertainty over Westports’ ability to secure a third five-year ITA incentive, in its view.

In the past, the government granted the ITA incentive for the first five-year period, then renewed it once for another five years, but none has ever been granted the ITA for a third time.

However, AirAsia told analysts last week that it had secured the ITA for the third time, paving the way for Westports to obtain the same.

“This is critical for Westports since its CT8 and CT9 expansion capex will be mostly spent in the next five years.

“We think the likelihood of a port tariff hike is high. While Westports is doing well, its GLC sister port, Northport, is suffering from multi-year volume declines and cost escalation, and needs to raise cash for a major revamp of its aging facilities.

“If the Ministry of Transport approves the tariff hike, it will apply equally to both Westports and Northport, as they are both governed by the Port Klang Authority.

“Once the official tariffs are raised, with Jan 1 2016 as a likely start date in our view, Westports will raise tariffs on gateway boxes immediately, and raise transshipment tariffs gradually,” it said.

Source: The Star

[winston]

TAN SRI G. GNANALINGAM
Flagship: Westports Holdings Bhd
Net worth: RM6.7bil

GNANALINGAM has built Westports in Port Klang into a bustling port handling a total annual container handling capacity of 11 million twenty-foot equivalent units (TEUs).

The port has sustained utilisation rates well above 75% for the past six years on organic trade volume growth and aggressive market share gains over neighbouring ports.

The commissioning of two new handling terminals should lift total capacity to 16 million TEUs, boosting capacity at a 6% compounded annual growth rate until 2020, according to reports.

The tycoon started the port from “a barren, swampy island” in 1994 and it is today one of the main hubs serving container traffic along the Straits of Malacca, which is the key shipping route from the west to the east. The company was listed on Bursa Malaysia in 2013.

Competitive rates and rising efficiencies are said to be among factors that have lured traffic to its port.

The port is said to hold the record for one of the world’s fastest turnaround with 734 moves per hour with a nine-crane deployment on a single vessel.

But there are challenges with the planned container shipping realignments approaching by April 1, that may see a significant shift in container volumes in the coming year.

A long-term risk comes from the planned development of the third Port Klang facility at Pulau Carey that may compete with Westports.

Shares of Wesports closed 4% higher to RM4.30 as of year-end, giving it a market capitalisation of RM14.66bil.

Based on this, his 45.5% stake is valued at RM6.67bil.

Source: The Star