Delay in shipping line arrival time schedule coupled with pandemic-induced supply chain disruption and the recent Suez Canal blockage incident could potentially limit Westports’ total container volume this year. — AFP photo
KUCHING: Westports Holdings Bhd’s (Westports) first quarter of the financial year 2021 (1QFY21) performance were within expectations but analysts highlighted possible uncertainties in the second half of the year (2HFY21) stemming from the Suez Canal incident in March.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) noted that Westports’ 1QFY21 core net profit (CNP) of RM188.3 million (up 23 per cent year-on-year and up 23 per cent quarter-on-quarter) came in within expectations.
However, it pointed out: “Delay in shipping line arrival time schedule coupled with pandemic-induced supply chain disruption and the recent Suez Canal blockage incident could potentially limit total container volume this year.”
MIDF Amanah Investment Bank Bhd’s research team (MIDF Research) further said that Westports’ management is adopting a positive yet cautious stance on the group’s performance this year.
“Despite the apparent positive performance for the first half of FY21, the second half of the year remain an enigma as global supply chains recalibrating to normalcy, but without much success.
“Shipping delays are at an all-time low, below 30 per cent level compared to previously at average 60 per cent level. Furthermore, with yard storage hovering circa 90 per cent capacity, there is an elevated possibility of port congestion and susceptibility to supply chain shock,” it said.
Nevertheless, MIDF Research remained positive on Malaysia’s trade outlook despite this possible setback.
“We expect Malaysia’s trade performance to rebound in 2021, primarily driven by the expected return to normalcy in global supply chain.
“With mass-scale vaccines inoculations, massive fiscal injections, and monetary policies support to rejuvenate economic growth, we believe these will be the drivers for the global economy to recover in 2021.
“The first two months of 2021 saw exports and imports averaged at 11.7 per cent y-o-y and 6.6 per cent y-o-y respectively with competitive commodities price and spare capacity as the tailwind to propel recovery.
“Based on our economists estimate, Malaysia’s exports and imports growth will see 13.5 per cent y-o-y and 12.7 per cent y-o-y increase respectively this year.
“If materialised, this positive economic condition will positively impacted Westports and propelled the earnings growth of the group even further,” it explained.
On its long-term prospects, Kenanga Research noted that with total capex for Westports 2 (CT10-17) amounting to circa RM10 billion, the new CTs are expected to nearly double in capacity to 27 million TEUs from 14m TEUs spread over 20 years.
“With anticipated full completion only by 2040, we view this investment as a very long-term play for the group, thus ruling out any earnings accretive development over the next few years.
“The global supply chain is adjusting to a combination of factors, such as higher consumer demand for containerised goods in Western economies, lockdowns and a global supply chain adjustment adhering to Covid-19 precautionary measures.”