KUCHING: Westports Holdings Bhd’s (Westports) strong second quarter of 2014 (2Q14) results were well within analysts’ expectations, mainly driven the group’s container division.
In a statement to Bursa Malaysia, Westports said it recorded a set of stellar financial performance for the six months period ended June 30, 2014 or first half of 2014 (1H14).
Its profit after tax soared 16.7 per cent year on year (y-o-y) to RM231.5 million in 1H14 on the back of strong container throughput growth, termination of management service agreement and lower effective tax rate.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) was encouraged by the robust container throughput growth achieved in 1H14 albeit being partially offset by a mild drop in break bulk cargo volume.
It believes that the momentum could continue in 2H14 although at a slower pace given its higher base in 2H13.
“Currently, the group is in the midst of completing an additional container terminal (CT7). The first 300m berth (B20) has been completed,” it observed.
By the end of 2014, the research arm said CT7 is scheduled to be fully operational and this will increase the group’s handling capacity from 9.5m twenty-food equivalent unit (TEU) to 11m TEU.
Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said following the rejection by China’s authority of the proposed P3 alliance in June, it has imputed slightly higher container growth.
Maybank Investment Bank Bhd (Maybank IB Research) additionally pointed out that management revised its total container volume growth upward slightly to 7-13 per cent for financial year 2014 (FY14), from 6-12 per cent,to reflect the robust 1H14 volume (+13 per cent y-o-y).
“This is still in line with our projection of 9.5 per cent for FY14 as we expect a milder y-o-y growth in 2H14 considering the high base in 2H13,” Maybank IB Research said.
As such, it maintained its earnings forecasts given the full commencement of CT7 in 4Q14, which will see its operating cost flatten out and lower effective tax rate kicking in on investment tax incentive.
All in, Maybank IB Research maintained ‘buy’ and discounted cash flow-based (DCF-based) target price of RM2.85 per share, pending clarification on a potential tariff revision, a key re-rating catalyst.
Similarly, Kenanga Research maintained its earnings and dividend forecast for now as the results are in-line.
It also maintained its ‘outperform’ rating on Westports and target price of RM3.13 per share on dividend discount model (DDM) valuation methodology.
On the other hand, MIDF Research reiterated ‘NEUTRAL’ on the stock with a revised target price of RM2.95 per share.
“Considering the consistently strong container growth, we are increasing our FY14-15 earnings forecasts by 15.2 per cent and 14.4 per cent for FY14-15.
“We also roll forward our valuation to FY15 with revised target price of RM2.95 per share, based on DDM,” the research arm explained.