Minimal impact on Westports from possible trade war
KUCHING: Analysts see minimal to no impact from the potential trade war between US and China on port handlers such as Westports Holdings Bhd ( Westports) for the time being.
In a report, the research arm of Maybank Investment Bank Bhd ( Maybank IB Research) said in the event that US- China impose tariffs on each other’s imports, the impact to Westports could be cushioned as China/US may still source for cheaper supplies elsewhere and the vessels may still need to pass through the Straits of Malacca.
Presently, it noted that AsiaAmerica accounts for circa eight per cent of Westports’ total volume and proposed tariff on the combined US$ 103 billion US- China imports represents 1.2 per cent of the total US- China trade ( US$ 8.3 trillion).
“However, if the trade war escalates, global trade could soften on uncertainties surrounding businesses, hence affecting Westports’ volume,” it opined.
Meanwhile, it noted that Westports’ January to February 2018 throughput was on a steady recovery trajectory.
“In January to February 2018, total container volume at Westports fell eight to nine per cent year- on-year ( y- o-y) y- o-y due to a high base in January to February 2017 and the substantial volume from CMA CGM/ UASC was only completely moved out in the second quarter of 2017 (2Q17).
“However, comparing to 4Q17, the monthly volume in January to February 2018 could be a slight growth, likely driven by the gateway segment and intra-Asia services.
“We also see signs of positive recovery ahead CMA CGM will be replacing some of its 14,000 TEUs vessels with the larger 20,000 TEUs vessels, indicating CMA CGM’s expectation of volume growth ahead, and Ocean Alliance will be adding a new service at Westports in April 2018,” it explained, noting that CMA CGM and Ocean Alliance contributed 37 and 60 per cent to total volume respectively in 2017.
All in, Maybank IB Research pegged a ‘hold’ call on the stock.