KUCHING: Westports Holdings Bhd’s (Westports) first quarter of the financial year 2014 (1QFY14) results were mostly within analysts’ expectationsin tandem with its year on year (y-o-y) container throughput growth.
In a statement to Bursa Malaysia, Westports outlined that its net profit for the 1Q of 2014 (1Q14) unaudited financial results had registered a surge of 38 per cent compared to the same period last year.
“The significantly higher net profit was largely attributable to higher container throughput, termination of management service agreement and a lower effective tax rate,” the group had highlighted.
With Westports’ results in line, most analysts have left their earnings forecast unchanged.
In fact, RHB Research Institute Sdn Bhd (RHB Research) has gone on to reiterate that the proposed P3 alliance will not be detrimental to Westports’ throughput, noting that new services are being added by its customers.
It further noted that for March, Westports reached another record throughput, for both transshipments and gateway cargo.
“All the container trade lanes witnessed growth except for Asia-Europe, which saw a marginal drop of 0.6 per cent, in our opinion, likely due to the impending P3 alliance.
“Note that the P3 alliance has yet to receive approval from China and Korea,” the research house observed.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) has also concurred with the management’s view that P3 alliance will not hit Westports’ volume significantly and maintained the view that they are able to deliver five to 10 per cent throughput growth this year.
As for the research arm of Maybank Investment Bank Bhd (Maybank IB Research), it expects the robust volume growth to sustain into 2Q14, partially due to the fact that volume in thecorresponding 2Q13 was exceptionally slower ahead ofthe 13th General Elections in May 2013.
In addition, it noted that the break bulk and roll-on/roll-off (RORO) volume have also picked-up in March 2014.
“We maintain our earnings forecasts, which are based on an eight per cent per annum container volume growth in FY14-15, with the impact of P3 alliance (potentially from mid-2014) already imputed for,” the research arm added.
It further noted that potential volume loss from P3 alliance could be lower at an estimated two per cent of Westports’ total volume, mitigated by new non-P3 alliance services.
All in, Maybank IB Research maintained ‘buy’ with unchanged discount cash flow-based (DCF-based) target price of RM2.70 per share, with a decent dividend yield of 4.2 per cent.
Similarly, RHB Research reaffirmed its ‘buy’ call on the stock at a DCF-based fair value of RM2.91 per share, premised at a weighted average cost of capital (WACC) of 7.12 per cent.
As for Kenanga Research, it has maintained its ‘outperform’ recommendation on Westports and target price at RM2.91 per share based on dividend discount model (DDM) valuation.