Introduction

Westports Holdings, a key transshipment hub at the Straits of Malacca and a vital port serving Malaysia’s Klang Valley region, delivered record earnings for FY24. This comprehensive report by Maybank Investment Bank Berhad dives deep into the company’s financial performance, strategic developments, and investment recommendations, uncovering key insights into one of Malaysia’s most critical logistics entities.

Strong Financial Performance in FY24

Westports Holdings achieved a core net profit (CNP) of MYR903 million for FY24, exceeding consensus estimates by 6% and Maybank’s forecast by 9%. Although container volume growth remained muted at +1% YoY, the company’s performance was bolstered by higher container yields and value-added services (VAS). Revenue grew by 9% YoY to MYR2.28 billion, while lower fuel costs and favorable tax rates further contributed to profitability.

Gateway Volume and Value-Added Services as Primary Drivers

Westports’ Q4 FY24 CNP, excluding one-off items, surged by 25% YoY to MYR256 million. Revenue rose 14% YoY to MYR613.5 million, with container yields climbing 11% YoY to MYR178,000 per twenty-foot equivalent unit (TEU). This growth was largely driven by an increased mix of gateway cargo and higher VAS charges, including reefer and storage demand. For the full year, CNP grew 15% YoY, supported by an 8% increase in gateway throughput to 10.97 million TEUs and a 9% revenue rise.

Container Volume Dynamics

Q4 FY24 container throughput volume remained flat YoY at 2.87 million TEUs but witnessed a 6% QoQ improvement. For FY24, gateway throughput rose by 8% YoY, driven by higher imports and foreign direct investments (FDIs). However, this was offset by a 4% YoY decline in transshipment volume, attributed to the loss of ZIM services following a national ban in late 2023. Despite seasonal QoQ declines, January 2025 saw YoY growth in container volumes.

Outlook and Tariff Updates

Westports anticipates a 0%-5% container volume growth for FY25, with updates on tariff hikes expected by the end of Q1 2025. These adjustments, coupled with resilient gateway volume growth, are projected to bolster profitability as the company embarks on an ambitious mega expansion plan. Additionally, Westports is exploring a 5-year Dividend Reinvestment Plan (DRP), which is pending AGM approval. Under full uptake, annual dilution is estimated to remain below 5%.

Impact of the Red Sea Crisis

In the first half of 2024, Westports faced operational disruptions due to Red Sea rerouting, which caused regional port congestion. Berth occupancy peaked at 83%, and yard utilization exceeded 100% before normalizing at 80%. These conditions, however, elevated VAS revenue and improved blended container yields. The crisis largely normalized by Q3 FY24, and the recent ceasefire agreement in January 2025 is expected to minimize further disruptions.

Shipping Alliance Reshuffling

Significant changes in shipping alliances are set to take effect in February 2025, presenting both challenges and opportunities for Westports. The dissolution of the 2M Alliance and the formation of new partnerships, such as Gemini Cooperation and Premier Alliance, are expected to reshape global trade lanes. Unlike a similar reshuffle in 2017, which caused a 9% drop in container throughput, the current restructuring is anticipated to benefit Westports. The port’s reliance on the unaffected Ocean Alliance, which accounts for over 50% of its volume, and its positioning to attract new services from Premier Alliance are key advantages.

However, transshipment volume growth is expected to remain limited until the operationalization of Container Terminal 10 (CT10) by Q3 2028. Current terminal utilization stands at 78%, with an upper limit of 90% before operational efficiency is impacted.

Revised Earnings Forecast

Maybank Investment Bank has revised its FY25E and FY26E forecasts, raising core net profit projections by 11% and 39%, respectively. While total container throughput estimates were reduced by 2% and 1%, container yield assumptions increased by 8% and 17%, reflecting a more favorable container mix. Additionally, the anticipated tariff hike timeline has been moved up from FY27E to FY26E, further boosting earnings projections.

Valuation and Investment Recommendation

With a 12-month price target of MYR5.39, up 25% from the current price of MYR4.47, Maybank Investment Bank reiterates its “BUY” recommendation on Westports Holdings. The valuation is based on a Discounted Cash Flow (DCF) model with a Weighted Average Cost of Capital (WACC) of 7.4%. While risks such as global economic slowdowns and tariff delays remain, Westports’ strategic initiatives and operational resilience position it as a compelling investment opportunity.