WESTPORTS VOLUME LIKELY TO RISE IN Q3
TA Securities keeps ‘hold’ call on container terminal operator with RM3.78 target price
WESTPORTS Holdings Bhd’s transshipment volume is expected to rebound in the third quarter, said TA Securities.
The transshipment volume had dropped 13 per cent year-on-year in the first half of the year.
TA Securities said the decline in volume in the Asia-Europe trade lane moderated to 32 per cent in the second quarter from a contraction of 56 per cent in the first quarter, as the impact of formation of new shipping lines on earnings growth should be completed in the second quarter.
“Looking forward, the trade lane as well as transshipment volume are expected to resume growth in the third quarter onwards,” it said.
TA Securities said a trade war might not necessarily be bad for Westports as it could stimulate cargo movement in the region.
“According to the management, there was no significant decline in container shipments in the Asia-America trade lane, which was flat at two million TEUs (twenty-foot equivalent unit) in the second quarter.
“Looking forward, the impact is expected to be negligible as the affected products of the trade war between the United States and China could be those high value products or services, which use other modes of transportation,” it said.
As far as tax holiday period and the implication of the Sales and Services Tax (SST), TA Securities said there was no obvious change in cargo movements in the second quarter as the preparation time for companies to react to the zero-rated Goods and Services Tax in Malaysia was too short.
For the implementation of SST, effective September, it said shipments of cargoes could be affected if future sales declined significantly.
On its Container Terminal 10 (CT10) to CT19 port expansion, TA Securities said Westports would not begin the construction until the completion of a feasibility study, which was expected by year-end, signing of concession with the government and reaching the trigger point of 75 per cent port utilisation rate.
However, the company would kick start the land reclamation works next year to provide longer time for the land to settle.
Previously, Westports group managing director Datuk Ruben Emir Gnanalingam said the completion of CT8 and CT9 last year had increased its total container handling capacity to 14 million TEUs per annum.
TA Securities reiterated its “hold” recommendation on Westports as investment interest could be low due to trade war concerns. It also maintained Westports’ target price at RM3.78.