AmInvest Research cuts Wesports net profit forecasts, retains Hold
KUALA LUMPUR: AmInvestment Bank Research cut its FY18-19F net profit forecasts by 8% and 5% respectively and reduced its fair value by 2% to RM3.74 from RM3.82 but maintained its Hold call.
It said on Thursday its new fair value was based on 21 times revised fully diluted FY19F EPS, at about 10% discount to Westports’ average historical forward price-to-earnings (P/E) of 23 times.
AmInvest Research said this was to reflect the subdued outlook for the port sector over the short-to-medium term on slowing global economy and potential headwinds from the US-China trade tension.
“Our earnings downgrade stems largely from: (1) housekeeping; and (2) the reduction in our FY19F container throughput growth rate assumption to 3% per annum (from 5% previously),” it said.
The research house maintained its FY18F container throughput growth rate of 5%.
It understands that for 11MFY18, Westports’ container throughput grew close to 5% on-year (vs. only 2% on-year for 9MFY18) thanks largely to exceptionally strong gateway and transshipment volumes in October and November.
The research house said its key highlights from its recent engagement with the company were:
1. The company is hopeful about a potential 15% hike in Port Klang’s container tariff on March 1, 2019;
2. The company guided for volume throughput growth rate of 3% to 8% in FY19F, which it finds a tad optimistic given the weak macro picture globally;
3. Westports is grateful for Transport Minister Anthony Loke’s efforts to engage with China Cosco Shipping Corporation Ltd and pitch to the world’s fourth largest container shipping company (and a key member of the Ocean Alliance) the idea of making Malaysia one of its transshipment hubs in Southeast Asia.
“However, we sensed cautiousness in Wesports on the likelihood of Cosco warming up to the idea over the immediate term,” it said.
4. With its overall utilisation dipping below 70% following the commencement of CT8 and CT9, coupled with the uncertain global economic outlook, there is no major capex for Westports over the medium term.
Source: TheStar