Westports’ throughput to be weaker as shipping alliance reshuffling effective in April 2017

KUCHING: Westports Holdings Bhd’s ( Westports) throughput for the first quarter of 2018 (1Q18) is expected to be weaker yearon-year ( y- o-y) as the alliance reshuffling was only effective April 2017, analysts observed.

Kenanga Investment Bank Bhd’s research arm ( Kenanga Research) noted that in terms of container throughput, it believed the nine million TEUs in FY17 should serve as a new low base for organic growth moving forward, with low single- digit percentage growth expected for the financial year 2018 (FY18).

“Growth will be expected to be driven by continued growth in gateway volumes on the back of robust economic growth figures, and recovery of transhipment volumes in a post-reshuffling business environment.

“As for the upcoming 1Q18 results (tentative release next week), we expect numbers to come in poorer on a y- o-y basis as the reshuffling of shipping alliances only came into effect April 2017,” it opined.

Despite the expected overall recovery in container throughput, the research team also believed that Westports’ bottomline earnings could see some deterioration in FY18.

Overall, it forecasts Westports’ current core net profit ( CNP) of RM500.6 million and RM539.4 million for FY18E and FY19E which imply earnings decline of 23 and eight per cent, respectively.

“The poorer earnings are mostly attributed to reversion of the effective tax rate closer to usual corporate tax rates (compared to the effective tax rate of 3.7 per cent in FY17) given the expiration of tax incentives in December 2017, and increased finance costs following borrowings drawdown of RM250 million in FY17.

“That said, on the earnings before interest and tax ( EBIT) level, our FY18 to FY19E forecasts projects growth of three to six per cent,” it said.

Furthermore, it pointed out that FY18 will see the full compliance of MFRS 15, superseding the previous MFRS 8 and MFRS 111 reporting standards.

“This would result in significant changes towards its revenue and cost of sales line (which are marketing discounts are now netted-off in revenue line, rather than being recognised in cost of sales), but is largely expected to have a neutral impact towards bottomline earnings,” it added.

Meanwhile, Kenanga Research noted that as Westports has received an Approval-in-Principle for the expansions of CT10-19, this could mean be longer-term prospect project for the group.

“Westports had just completed the development of CT9 Phase 1 last year, bringing container capacity to 14 million TEUs per annum (from around 12 million TEUs the year prior).