Malaysian port operator Westports Holdings Berhad recorded FY17 container throughput of 9m TEUs which declined 10% YoY, in-line with our expectation of a poorer throughput outlook for the year.
The decline was mainly due to drop in transhipment, while cushioned by strong growth in the gateway. Meanwhile, full compliance of MFRS 15 effective FY18 should be earnings-neutral.
No changes made to our FY17-18E earnings forecasts. Maintain MARKET PERFORM and DDM-derived TP of RM3.70.
Westports announced an update on its full-year FY17 container throughput, reporting in at 9m TEUs. This represents a 10% decline from 10m TEUs in FY16, in-line with our expectations of a poorer throughput outlook for FY17. This also implies 4Q17 container throughput of 2.2m (-14% YoY, +3% QoQ).
The decline in container throughput was mainly due to drop in transhipment volumes, which we estimate to have declined around 24% in FY17, arising from the (i) reshuffling of global shipping alliances, as the old Ocean Three alliance transitioned into the new Ocean Alliance during
the year, coupled with (ii) restructuring of key clients within the global shipping industry, e.g. UASC’s merger with Hapag-Lloyd, and CMA CGM
’s business collaborations with PSA.
However, the transhipment decline was cushioned by strong growth from its gateway side, which we estimated to have recorded growth of 15% in FY17, backed by healthy domestic economic growth figures. From our understanding, gateway containers typically fetch higher margins than transhipment, and thus, would result in a milder impact towards its bottom-line impact.