Introduction

UOB Kay Hian’s latest report offers a detailed evaluation of Westports Holdings Bhd (WPRTS MK), a key player within Malaysia’s port services industry. The report delves into the company’s financial performance, operational challenges, growth opportunities, market positioning, and future outlook. Below is a comprehensive breakdown of the analysis, including the recommendations and insights provided by the brokerage.

Company Overview

Westports Holdings Bhd operates as an integrated facility at Port Klang, Malaysia’s premier port. The company specializes in container-handling services measured in twenty-foot equivalent units (TEUs) and provides a range of value-added services, including storage, reefer, container freight, removal, and more.

• Share Price: RM4.37
• Target Price: RM4.20
• Recommendation: HOLD (Maintained)
• Upside: -3.9%
• Market Cap: RM14.9 billion
• 52-Week High/Low: RM4.78/RM3.68

Performance Highlights

2024 Volume and Growth

Westports is expected to announce its 2024 results by 23 January 2025. The company delivered a flat container volume growth in 2024, aligning with its guidance. While its market share has slightly declined compared to SMA peers like Port of Singapore (PSA) and Port of Tanjung Pelepas (PTP), Westports has focused on its high-yield gateway business, which grew by 9% year-over-year (YoY) to 4.5 million TEUs. However, transshipment volumes declined by 5% YoY due to weather-related disruptions.

The Port Klang Authority (PKA) projects a 5.5% YoY growth in total container volumes for 2024, which could allow Westports to surpass projections in its gateway segment.

Operational Challenges

Global port congestion remains a significant risk for Westports. Severe weather conditions in late 2024 impacted Chinese ports, disrupting intra-Asia trade routes. Additionally, geopolitical tensions, such as the Red Sea Crisis, have led to rerouting and congestion at South African ports. East Asian ports also faced delays caused by typhoons and peak New Year demand, leading to ship anchorage delays of up to five days.

Port Klang’s Response to Congestion

Port Klang addressed congestion challenges with proactive measures, including prioritizing berthing for export and transshipment vessels, deploying additional quay cranes, and expediting gate passes for hauliers and forwarders. These initiatives helped free up yard space and streamline container handling processes.

New Developments

Liquid Bulk Terminal 4A (LBT4A)

Westports officially launched operations at its Liquid Bulk Terminal 4A (LBT4A) in January 2025. Construction began in Q4 2022, with the jetty completed in March 2024. The terminal is expected to contribute to revenue growth, complementing the company’s container business. Furthermore, Westports is negotiating tariff increases for this segment while advancing plans for its WPRTS 2 expansion, targeted for 2028.

Regional Comparisons

PSA recorded a 5.4% growth in container volumes in 2024, reaching a record 41.12 million TEUs, with 90% being transshipment. Meanwhile, PTP achieved a historic milestone of over 12.3 million TEUs in 2024, driven by enhanced efficiency and digitalization. These achievements underscore the competitive landscape within the SMA region.

ASEAN Opportunities

As Malaysia chairs ASEAN in 2025, regional ports are encouraged to collaborate rather than compete. The “China Plus One” strategy has prompted businesses to expand production bases within ASEAN, creating opportunities for increased trade and port activity.

Key Financial Metrics

Valuation and Recommendation

UOB Kay Hian maintains a HOLD recommendation for Westports Holdings with a target price of RM4.20, based on a sum-of-the-parts (SOTP) valuation using discounted cash flow (DCF) projections until 2054. The valuation incorporates a weighted average cost of capital (WACC) of 7.8%, reflecting both tariff hike scenarios and medium-term challenges. The target price implies a 17x 2025F price-to-earnings (PE) ratio.

Despite long-term growth prospects, medium-term outlooks remain lackluster, balancing the risk-reward profile. Notably, recent M&A transactions in the container port industry were valued at 8-10x EV/EBITDA.

Environmental, Social, and Governance (ESG) Updates

• Environmental: Westports aims to achieve Scope 1 net-zero carbon emissions by 2050, with additional measures to reduce Scope 2 emissions.
• Social: Female representation on the Board of Directors increased to 50% in 2023, alongside significant social investments totaling RM1.6 million in 2023.
• Governance: Six out of ten board members are independent, ensuring robust governance standards.