Westports poised to benefit from trade recovery

PETALING JAYA: As Malaysia’s largest marine port operator, Westports Holdings Bhd is positioned front and centre to benefit from a pick-up in the country’s trading activities, underpinned by a robust recovery in intra-asia trade.

In its latest company update, RHB Research said it is turning more optimistic on the group’s prospects.

This is because there has been a shift in the country’s and region’s trade prospects, it added.

“RHB Economics reaffirms its optimistic stance on Malaysia’s trade prospects for 2024.

“This is supported by a brighter global and regional economic landscape, the bolstering economic performance of China and resurgence in the global technology cycle,” it said.

In particular, RHB Research expects the growth potential in the electrical and electronics sector, which makes up about 40% of Malaysia’s exports, to attract more foreign direct investment (FDI).

RHB Research credits the government for its initiatives to stimulate FDI.

These measures include tax incentives, reinvestment allowances, relocation incentives and regulatory streamlining.

“The initiatives are aimed at bolstering the country’s FDI inflows relative to the nominal gross domestic product, which has generally exceeded those of other emerging markets in South-east Asia, underscoring its growth prospects,” said RHB Research.

The research outfit added that Westports will be the primary beneficiary of these developments.

This is particularly given the intra-asia segment accounts for 65% to 67% of the group’s throughput volume.

RHB Research also expects the growth momentum, which began with a surge in container volume in 2023, to continue in the first quarter of 2024 (1Q24).

It said container volume is expected to remain within the 2.3 million to 2.8 million 20-foot equivalent unit (TEU) range, as trade activities pick up domestically and across the intra-asia region.

“As such, we estimate 1Q24 to see a yearon-year improvement, pencilling in a core net profit within the range of Rm195mil to Rm200mil,” it said.

Looking ahead, Westports’ plans to double its capacity from 14 million TEUS to 27 million TEUS over a projected 20-year period will cater to the long-term increase in demand, said RHB Research.

Picking out Westports among the country’s infrastructure plays, the research firm upgraded the share to a “buy” from a “neutral”.

It has increased the target price of the counter to RM4.52 from RM4.12.