Analysts neutral on immediate impact of Westports’ proposed Pulau Indah land acquisition
KUCHING: Westports Holdings Bhd’s ( Westports) proposed acquisition of a land at Pulau Indah garnered neutral views from analysts on its immediate impact.
However, they are positive on its long- term prospects given that the land could be utilised for Container Terminal (CT) 10 to CT19’s expansion plans.
In an announcement on Bursa Malaysia, Westports said it has acquired a piece of leasehold land under the sea with the size of 154.2 hectares (ha) at Pulau Indah, Port Klang, for a total cash purchase consideration of RM116.185 million.
It explained that the rationale for the proposed acquisition was for terminal expansions as the current preliminary port design for CT10 to CT18 requires additional land acreage to accommodate new wharf and container yard space in order to facilitate the effective operations of the new container terminals.
“We view the proposed acquisition to be positive as it signals some form of feasibility of the undergoing studies for the CT10 to CT19 terminal expansion plans,” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) opined.
It added, “With the payment for the proposed acquisition to be done in stages, we reckon that it will not have a material impact on Westports’ day-to-day operations and financial health as the company generated a net operating cash flow of RM54 million in the first quarter of the financial year 2018 (1QFY18).”
It also noted that as at March 31, 2018, Westports has a cash pile of RM306.6 million and borrowings from its Sukuk Musharakah Medium Term Note ( SMTN) programme worth RM1.5 billion which translates to a net debt-to-equity ratio of 0.56-folds.
As for the immediate impact of this proposed acquisition towards Westports’ earnings, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) noted that the impact of the land acquisition is neutral for the immediate term, with utilisation of the land only possible after land reclamation.
“All-in, we view the expansion of CT10 to CT19 to be a longer-term prospect, with full completion expected by the year 2040, and thus, would not expect any earnings accretive development to be reached at least in the next two to three years.
“For the time being, we feel that the group should be focusing on increasing utilisation of its current terminal capacity, after having completed expansions in CT9 Phase 1 in December last year,” it said.
All in, Kenanga Research maintained its ‘market perform’ call while MIDF Research maintained its ‘buy’ call.
MIDF Research said, “Overall, we favour Westports due to its strength in gateway container volume, the intra- Asia containerised trade which is expected to grow at 5.1 per cent year-on-year in 2018, andi) its attractive tariffs compared to Port of Tanjung Pelepas and Ports of Singapore.