Westports Holdings Berhad - Beat expectations on strong transhipment volumes
Mon, 04-Aug-2025 07:34 am
by Jayden Tan • Apex Research

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WPRTS (5246)

Target Price (RM)

5.360

Recommendation

Hold

  • Westports posted 2QFY25 CNP of RM 231.6m (+13.7% YoY, +4.1% QoQ), bringing 1HFY25 CNP to 50%/48% of our/consensus full-year forecasts. The results was above expectations, driven by better-than-expected transhipment volumes from restow activities.

  • Revised FY25F/FY26F earnings by +2.4%/+2.5% respectively to reflect stronger transhipment revenue from trade imbalances and US tariff adjustments.

  • Downgrade to HOLD (from BUY) with a higher TP of RM5.36 (from RM5.08), based on DCF valuation (WACC: 6.2%). While tariff hikes (+15% in 2025 and +9% in 2026) will support earnings, we see limited near-term catalysts until Westports 2 (CT10) commences operations in FY28.

 

Results higher than expectations. 2QFY25 results came in above expectations, with CNP of RM231.6m lifting 1HFY25 CNP to 50% of our full-year forecast and 48% of consensus estimates. We deem the results above expectations as we expect 2H to be stronger on the back of the recently implemented port tariff hikes. The outperformance was mainly driven by better-than-expected throughput volumes, particularly in transhipment, supported by restow activities from the temporary tariff reprieve that contributed to trade imbalances, as well as new service contributions from the Ocean Alliance.

 

Dividend. The board declared an interim dividend of 9.93 sen/share (2QFY24: 8.89 sen/share).

 

YoY. CNP rose 13.7%, underpinned by a 25.0% increase in revenue, driven by higher container revenue from transhipment growth (+9% yoy) and the recognition of RM84m in construction revenue related to ongoing land reclamation and dredging works for Westports 2. Gateway revenue rose a modest 1% yoy, weighed down by stricter regulatory controls on illegal e-waste and metal imports.

 

QoQ. CNP improved 4.1% on an 11.2% uplift in revenue, supported by higher transhipment throughput (+11% qoq) and stronger construction revenue (+184%). Gateway volumes (+2%) and other segment revenues remaining steady.

 

Outlook. Earnings in the coming quarters are expected to benefit from the port tariff hikes (+15% in 2025 and +9% in 2026). That said, we maintain our moderate single digit volume growth forecast, as global trade uncertainties and ongoing import restrictions on e-waste continue to weigh on gateway volumes. Capacity constraints also remain a key issue, with berth occupancy at 85% and yard utilisation at 87%, a situation unlikely to ease until Westports 2 (CT10) becomes operational in FY28.

 

Earnings Revision. We revise our FY25F and FY26F earnings forecasts upward by 2.4% and 2.5%, respectively, reflecting higher transhipment revenue driven by trade imbalances and inefficiencies caused by US tariff adjustments.

 

Valuation. Despite the earnings uplift, we are downgrading our call from BUY to HOLD, with a higher TP of RM5.36 (from RM5.08), based on the DCF valuation method, applying an unchanged discount rate of 6.2%. The revised TP factors in higher forecasted free cash flows from earnings adjustments as well as the impact of the DRP. The downgrade reflects our view that the current share price has largely priced in the benefits of the port tariff hikes, with limited short term growth catalysts until CT10 becomes operational in FY28.

 

Risk. Key risks include uncertainties surrounding Trump’s trade policies, stiff regional competition, and potential delays in the Westport 2 expansion.

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