MIDF maintains ‘buy’ call on Wesports

MIDF said that Westports continues to be in favour due to lower transshipment tariffs amongst its peers such as Port of Tanjung Pelepas and Port of Singapore even after taking into account of the second phase of tariff hike in March 2019. — Reuters pic
MIDF said that Westports continues to be in favour due to lower transshipment tariffs amongst its peers such as Port of Tanjung Pelepas and Port of Singapore even after taking into account of the second phase of tariff hike in March 2019. — Reuters pic

KUALA LUMPUR, May 8 — MIDF Research has maintained its “buy” call on Wesports Holdings Bhd, driven by bullish outlook on the company with a lower target price of RM4.03 compared with RM4.38 previously.

In a research note today, MIDF said that Westports continues to be in favour due to lower transshipment tariffs amongst its peers such as Port of Tanjung Pelepas and Port of Singapore even after taking into account of the second phase of tariff hike in March 2019.

It said the extension of the Ocean Alliance to 10 years from initially five years until 2027 will mitigate the effects from the reshuffling of alliances profoundly seen in financial year 2017.

“Contribution from intra-Asia and Asia-Europe trade lanes may face temporary downward pressure from coronavirus.

“Nevertheless, we expect Westports’ container throughput to recover in financial year 2021, in line with the International Monetary Fund’s (IMF) projection of Malaysia’s gross domestic product (GDP) growth of 9.0 per cent for the same year, the fastest amongst Asean-5.

On a longer term horizon, MIDF said ‘Westport 2’ expansion plan is still expected to increase capacity by roughly 50 per cent to approximately 28 million twenty-foot equivalent units (TEUs) per annum by 2040.

This, it said, would allow Westports to compete more effectively for transshipment volumes against Ports of Singapore which has plans to raise capacity from around 40 million TEUs to 65 million TEUs by 2040.

“Risks to our call include prolonged Covid-19 outbreak and any abrupt downside revision to port tariffs,” it added. — Bernama

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