TRANSPORTATION & LOGISTICS

WESTPORTS HOLDINGS
(WPRTS MK EQUITY, WPHB.KL) 3 Feb 2021

Earnings growth in FY20 despite pandemic

Company report BUY
AmInvestment Bank (Maintained)
www.amequities.com.my
03-2036 2240 Rationale for report: Company results/update

Price RM4.57 Investment Highlights

Fair Value RM4.92
52-week High/Low RM4.69/RM2.97  We raise our FY21–22F net profit forecasts by 4% and 2%
Key Changes respectively, and tweak our fair value up by 2% to RM4.92
Fair value  (from RM4.83 previously). We value Westports at 23x its
EPS  revised FY22F EPS, which is in line with its average
historical forward PE. We believe the throughput of
YE to Dec FY20 FY21F FY22F FY23F
seaports, Westports included, to continue to grow in 2021
Revenue (RM mil) 1,975.0 1,980.9 2,172.8 2,260.5
as global trade recovery gains further momentum, backed
Core net profit (RM mil) 667.3 688.4 730.3 775.8 by the reopening of economies, businesses and borders.
FD Core EPS (sen) 19.2 20.2 21.4 22.8 Maintain BUY.
FD Core EPS growth (%) 10.8 5.2 6.1 6.2
Consensus Net Profit (RM mil) - 702.1 750.1 -  Westports’ FY20 core net profit of RM667.3mil (excluding
DPS (sen) 11.5 15.1 16.1 17.1 RM12.8mil one-off expenses such as written-off PPE and
PE (x) 23.4 22.5 21.6 20.8
impairment on trade receivables) came in within our
EV/EBITDA (x) 13.5 12.4 11.0 9.4
Div yield (%) 3.0 4.0 4.2 4.5 forecast and consensus estimates.
ROE (%) 18.5 13.5 11.5 10.1
Net Gearing (%) 18.4 25.1 27.5 29.5  For the year, its container throughput volume declined by
3% YoY. A 7% YoY contraction in transshipment throughput
Stock and Financial Data (due to the general slowdown in global trade amidst the
pandemic), was cushioned by a 3% YoY increase in
Shares Outstanding (million) 3,410.0 gateway throughput (driven largely by the recycled paper
Market Cap (RM mil) 15,583.7
Book Value (RM/share) 0.83 processing activities locally, the healthcare/hygiene-related
P/BV (x) 5.5 products, polymers related products, etc.).
ROE (%) 24.3
Net Gearing (%) 18.4  Westports reiterated its guidance for a low single-digit
growth for its container throughput volume in FY21F,
Major Shareholders Pembinaan Redzai (42.4%) underpinned by the recycled paper processing activities
South Port Investment
Holdings(23.6%) locally, relocation to Malaysia and the expansion of
EPF(6.3) multinational companies’ manufacturing facilities locally,
Free Float 27.7 coupled with the recovery in global trade. We are
Avg Daily Value (RM mil) 8.0 maintaining our container throughput growth assumptions
Price performance 3mth 6mth 12mth of 3% and 5% for FY21F and FY22F respectively.

Absolute (%) 20.3 16.3 15.7

 While Westports’ container throughput volume contracted
Relative (%) 11.6 18.0 12.1 in FY20, its core net profit grew by 4% YoY, driven largely
by: (1) a full-year impact of an effective 13% hike in
5.0 2,000 container tariff (from 1 Mar 2019), vs. only a 10-month
4.5 1,800 impact in FY19; (2) a slight change in product mix with an
4.0 1,600 increase in higher-margin gateway cargoes (at the expense
3.5 1,400 of low-margin transshipment cargoes); and (3) higher
3.0 1,200 incomes from value-added services, particularly, reefer and
2.5 1,000 storage services.
2.0 800
1.5 600
 There are slight delays in Westports’ 2.0 expansion plan
comprising eight new terminals, CT10 to CT17, which will
1.0 400
double its container handling capacity to 28mil TEUs from
0.5 200
14mil TEUs. Westports continues to work on the land use
0.0 0
Feb-16 Feb-17 Feb-18 Feb-19 Feb-20 conversion and negotiate with the government on the
concession terms. It hopes to conclude the negotiation by
WPRTS MK FBMKLCI Index mid-2021 (vs. early 2021 guided previously) and commence
physical works (i.e. reclamation and dredging) in 2HFY21.
Westports Holdings 3 Feb 2021

 Meanwhile, Westports is boosting its capacity to 15mil TEUs by end-2023 via its recently completed CT9 Container
Yard Zone Z (which increases the total ground slots by 9% to 51,123 and reefer plugs by 20% to 3,532). It has placed
orders for 21 new RTG cranes for the new container yard while two replacement quay cranes are expected to be
delivered in 1QFY21 (to replace the cranes damaged in a mishap in end-2019). It has earmarked a total capex of
RM400mil to RM500mil in FY21F, largely to fund the construction of the new yards and the purchases of the new
RTG cranes, trucks, etc.
 Its FY20 dividends translate to a payout ratio of only 60% to conserve cash. It guided for the payout ratio to revert
to 75% in FY21F.
 Looking beyond the pandemic, the outlook for the port sector in the region (Malaysia included) is resilient,
underpinned by global trade and investments in the manufacturing sector that generate tremendous inbound
(feedstock) and outbound (finished product) throughput for ports. There have been significant relocations of the
manufacturing base by multi-national companies out of China to the region due to the rising labour and land costs,
exacerbated by the US-China trade war. Westports has charted a long-term expansion plan to capitalise on these.

AmInvestment Bank Bhd 2

Westports Holdings 3 Feb 2021

EXHIBIT 1: RESULTS SUMMARY

YE Dec FY19 FY20 FY20 FY20 FY20 QoQ YoY FY19 FY20 YoY
(RM mil) 4Q 1Q 2Q 3Q 4Q Chg Chg 12M 12M Chg
Turnover 452.8 473.5 431.6 528.4 541.5 2.5% 19.6% 1,782.9 1,975.0 10.8%
Container 389.0 396.0 355.0 441.0 412.0 (6.6%) 5.9% 1,536.0 1,604.0 4.4%
Conventional 32.0 31.0 22.0 30.0 33.0 10.0% 3.1% 122.0 116.0 (4.9%)
Marine 21.0 20.0 18.0 20.0 17.0 (15.0%) (19.0%) 83.0 75.0 (9.6%)
Rental 10.0 10.0 10.0 10.0 10.0 0.0% 0.0% 40.0 40.0 0.0%
Construction 0.0 17.0 26.0 28.0 69.0 n.m. n.m. 0.0 140.0 n.m.
EBIT 175.3 217.1 190.4 288.2 234.6 (18.6%) 33.8% 848.8 930.3 9.6%
Net inc/(exp) (17.3) (15.2) (15.6) (18.0) (16.4) (8.7%) (5.0%) (75.0) (65.3) (12.9%)
EI 53.8 16.3 6.7 0.1 (10.3) n.m. n.m. 53.8 12.8 n.m.
Pre-tax profit 158.0 201.9 174.7 270.3 218.2 (19.3%) 38.1% 773.8 865.1 11.8%
Taxation (32.6) (49.1) (40.4) (66.4) (54.7) (17.7%) 67.9% (153.9) (165.6) 7.6%
Net profit 125.4 152.8 134.3 203.8 163.5 (19.8%) 30.3% 590.9 654.5 10.8%
EPS (sen) 3.7 4.5 3.9 6.0 4.8 (19.8%) 30.3% 17.3 19.2 10.8%

Net profit (ex-EI) 179.3 169.1 141.1 203.9 153.1 (24.9%) (14.6%) 644.7 667.3 3.5%

EBIT margin 39% 46% 44% 55% 43% 48% 47%

Pre-tax margin 35% 43% 40% 51% 40% 43% 44%
Effective tax rate 21% 24% 23% 25% 25% 20% 19%
Source: company, AmInvestment Bank Berhad.

EXHIBIT 2: CONTAINER THROUGHPUT VS. CAPACITY UTILISATION

16 90

14 80

70
12
60
10
million TEUs

50
8
%
40
6
30
4
20

2 10

0 0
2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F

Total Throughput Volume (m TEUs) - LHS Handling Capacity (m TEUs) - LHS

Capacity Utilisation (%) - RHS

Source: company, AmInvestment Bank Berhad.

AmInvestment Bank Bhd 3

 0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
Jan-17
Mar-17
May-17
Jul-17

Source: Company
Sep-17
Nov-17
Jan-18
Mar-18
Westports Holdings

May-18
Jul-18
Sep-18
Nov-18
Jan-19

AmInvestment Bank Bhd

Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20

EXHIBIT 4: PB BAND CHART

Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21

-1δ
Avg
+1δ

0.00
5.00
10.00
15.00
20.00
25.00
30.00
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
EXHIBIT 3: WESTPORTS 2.0 EXPANSION PLAN

May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19

EXHIBIT 5: PE BAND CHART

Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21

Avg
+1δ

-1δ
3 Feb 2021

4
Westports Holdings 3 Feb 2021

Source: Company, AmInvestment Bank Bhd estimates

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AmInvestment Bank Bhd 5