Lower costs, gateway cargo keeps Westports in clearer waters
KUCHING: Earnings of Westports Holdings Bhd ( Westports) for the first nine months of financial year 2017 (9MFY17) came in estimates, with core profit after tax ( PAT) amounting to RM440.5 million which met analysts and consensus’ expectations.
According to MIDF Amanah Investment Bank Bhd ( MIDF Research), this comes as the firm’s third quarter (3QFY17) saw revenue going up by 3.8 per cent year on year (y- o-y) but core PAT fell marginally by 0.4 per cent y- o-y due to the fall in transhipment throughput volume.
“The fall in core PAT was cushioned by an improvement in gateway cargo contribution where the ratio of gateway to transhipment now stands at 30:70 compared to 26:74 a year ago,” it added in a report yesterday.
“It was also aided by lower costs in the container segment that dropped 19.3 per cent y- o-y and lower manpower costs caused by lower overtime claims.”
This comes as the effects of reshuffling alliances are felt, it said, as Westports faced setbacks as the new alliances, the Ocean Alliance and THE Alliance commenced.
“The Ocean Alliance moved their containers to the Port of Singapore ( PSA) back in April as its largest member, CMA CGM completed its takeover of Singapore based Neptune Orient Lines ( NOL),” it added.
“On the other hand, another of Westports’ largest customers, UASC, did the same as it became a part of THE Alliance after being acquired by Hapag-Lloyd. The Asia-Europe and Asia-America trade lanes saw a decrease in container volumes as a result of this.
“Overall, the transhipment throughput volume recorded a decline by 23.2 per cent y- o-y decline which was the second consecutive drop for the year.”
Nevertheless, MIDF Research saw that Westports’ gateway contribution remained positive as gateway throughput volume continued to improve, expanding by 14.3 per cent y- o-y in 3QFY17 as exports volume surged highest on record, posting 14.2 per cent growth in the third quarter.
“We remain optimistic on the gateway segment in 2H17 amid the +14.5 per cent growth in gross external trade forecasted by our economics team for FY17.
“Tax rate slightly unchanged in 3QFY17. The effective tax rate was slightly unchanged in 3QFY17 at 15.2 per cent. In spite of this, we note that the tax rate has declined from 21 per cent in 1QFY17 and is expected to decline more in the 4QFY17.
“This will follow the capitalisation of terminal operating equipment and wharf.”
All these led the research firm to maintain a murky outlook for Westports’ second half of financial year but, adding that “FY18 will be better”.
“The management of Westports remains cautious, holding on to an expectation that FY17’s overall container throughput could decline between minus seven per cent and minus 12 per cent y- o-y, before flattening out in 2QFY18 and returning to growth from 3QFY18 onwards.
“Our forecasted decline in throughput volume is slightly more upbeat compared to management’s view. This hinges on continued strength in external trade and growth in global container shipping demand.
“Aside from that, Westports could benefit from service updates carried out by shipping alliances, having expanded its container handling capacity via CT8 and CT9 phase 1.”