Westports anticipate container volume decline in 3Q
KUCHING: Westports Holdings Bhd (Westports) expects to see an estimated 10 per cent decline in container volume for its third quarter due to higher base supply from “revenge spending” when the country transitioned from the full movement control order (MCO) to the recovery MCO, coupled with the yard congestion that the ports currently faced.
However, the team at Hong Leong Investment Bank Bhd (HLIB Research) said earnings impact for the port operator was likely limited as the congestion has spurred more value-added services (such as storage and reefer boxes), and has partially negated the higher operating expenditure (opex) from yard inefficiencies and lower port utilisation.
“Management clarified that congestion in the yard is happening due to persistent high dwell time for boxes -- currently at 16 days versus six days preCovid levels --caused by the pandemic induced disruption of supply chain globally as a result from various series of lockdowns,” it added in a report revier.
“Management expects the supply chain disruption to likely linger for at least one or two years as some countries may still impose lockdowns if there’s resurgence of cases as well as the expectation of rapid resupply of inventories when economy reopens.”
To note, the concession negotiations with authorities were still ongoing and the company was hopeful to conclude the agreement by end of this year.
According to management, the dredging and land reclamation works can be carried out as soon as they get the concession approval and they will only need to raise new debt or equity until 15 months after the start of land works.
The port operator indicated that if equity capital was needed, it would likely be up to RM1.3 billion as well as Sukuk program to raise between RM3 billion to RM5 billion to fund the entire RM12 billion capital expenditure for the expansion.
“Westports is also exploring dividend reinvestment plan to partially fund the capex of Westports 2,” HLIB Research continued. To recap, capex of 1st phase of expansion (CT10-13) is projected to be circa RM4 billion (for the first 10 years) and the total capex for the expansion is circa RM12 billion (stretched out for about 30 years).
Management also indicated that current projected capex might be higher if steel prices remain high by the time the company is building the wharf and buying the cranes for the terminal use.