KUALA LUMPUR (Feb 5): Analysts have remained bullish on Westports Holdings Bhd following its resilient financial performance in its financial year ended Dec 31, 2023 (FY2023), against the backdrop of expectations of a recovery in regional trade activities and minimal impact from the Red Sea crisis.
In a research note on Monday, Hong Leong Investment Bank (HLIB) upgraded its call for Westports to “buy” from “hold” with a target price (TP) of RM4.30.
According to HLIB, Westports' financial results were within expectations, reporting a core profit after tax and minority interest (Patami) of RM773.8 million for FY2023, reflecting a 9.2% year-on-year growth.
“Westports recorded a resilient set of results with the highest ever full-year revenue of RM2.15 billion and container volume of 10.88 million TEUs (20-foot equivalent units), which bucked the trend of a slowing global economy,” it said.
“The strong results were attributed to the group benefiting from the repositioning of empties in the early part of 2023 as customers took advantage of lower freight costs, strong gateway volume arising from the realisation of FDIs [foreign direct investments] with more industries and companies operating in Malaysia, and robust intra-Asia trade due to resilient regional economic activities,” it added.
Looking ahead, HLIB anticipates that the strong intra-Asia volume will continue into 2024 due to reshoring activities by global manufacturers, including the US and China, which will benefit regional Southeast Asian economies including Malaysia.
"Additionally, we believe there is upside potential to the group’s forecast as global demand and trade could see meaningful recovery towards 2H2024 [second half of 2024] once central banks begin to cut interest rates,” it added.
HLIB also projected the Red Sea disruption to affect only the timing of shipping without impacting the volume of shipments.
Meanwhile, MIDF Research has maintained its “buy” call for Westports with a TP of RM4.30, adding that the stock currently trades at a 20% discount compared to its five-year historical mean.
“In the absence of a recession and the possibility of monetary policy easing in major economies, improved Western consumption may boost interregional container movements,” MIDF Research stated in a note on Monday.
Similarly, the research house also expects the Red Sea crisis to have a minimal impact on Westports, anticipating only potential delays in capturing volume due to rerouting rather than an actual loss in volume.
However, it noted that the key downside risks include weaker-than-expected container throughput and the continued appreciation of the US dollar, which could impact fuel costs.
There are currently 12 "buy" calls and only one "sell" call on Westports, with a 12-month average TP of RM4.14, Bloomberg data showed.
At the time of writing, Westports saw its share price increase 12 sen or 3.17% to a two-year high of RM3.90, giving the group a market capitalisation of RM13.3 billion.
At RM3.90, the counter sees a price-earnings ratio of 17.05 times its net profit of RM779.4 million for FY2023.