Westports Holdings Berhad concluded the year by posting core PAT of RM206.5m in 4QFY22, bringing the full-year profit to RM670.8m or 104% and 97% of consensus estimates. In line with its 75% dividend payout policy, the Group has announced a 2nd interim dividend of 7.46 sen or totalling 14.37 sen for FY22.
On a quarterly basis, the container throughput was up by +4.9%yoy (transshipment: -0.6%, gateway: +14.6%yoy) with more competitive local exports and foreign direct investments (FDIs) in the state, while conventional throughput grew by +10.5%yoy as the new Liquid Bulk Terminal 5 (LBT 5) commenced operations in 2QFY22. Operational costs jumped by +13.0%yoy mainly due to the high fuel cost which peaked in 2QFY22, and this was partly offset by lower tax as Westports was recently granted a 10-year investment tax allowance (ITA). Overall, core PATAMI saw a decline of -12.0%yoy in 4QFY22. On a quarter-on-quarter basis, core PAT surged by +37.3% largely thanks to the ITA which has significantly brought down the 4QFY22 effective tax rate.
As for annual, Westports reported a lower core PAT of RM670.8m (- 13.7%yoy) in FY22 despite seeing a +3.9% increase in its operational revenue. This was largely due to the elevated price of unsubsidised diesel and the impact of Cukai Makmur, although this was largely moderated by the ITA. Container throughput fell by – 3.4%yoy for the year (transshipment: -9.9%, gateway: +8.8%) mainly due to weakening global consumer demand as well as increased blank sailings which have impacted the transshipment business. Similarly, conventional throughput rose by +8.0%yoy in FY22 due to the new LBT 5.
MIDF has made adjustments to its earning reviews, which include lowering the effective tax rates between 20%-22% to take into account the 10-year ITA recently granted by Ministry of Finance (MoF), (factoring in the imbalance cost pass-through (ICPT) implementation in 1HFY23 which is expected to impact the electricity costs by about 30%-40%, (iii) lowering our container throughput growth assumptions in FY23E/FY24F to +2.1%/+4.1% from +5.0%/7.0% as growing recessionary risks might lead to softening consumer demand particularly in the U.S. and Europe and (iv) revising upwards the conventional throughput growth assumptions in FY23E/FY24F to +2.0%/+2.0% from +1.0%/+1.0% with the addition of the new Liquid Bulk Terminal 4A (LBT 4A) in 4QFY23. As such, the earnings estimates for FY23E/FY24F were revised marginally by +0.4%/-0.2%.
Downgrade to NEUTRAL. As a result of the earnings revision, MIDF derived a slightly lower TP of RM3.90 (g: 2%,
WACC: 8%) from RM4.00 and downgrade our call from BUY to NEUTRAL given all the positives have been priced in.
Westports is currently trading at 18.2x FY23F P/E, slightly lower than its 5-year mean, but believes this is justified
given its muted near-term outlook against a backdrop of high inflationary pressures and changes in operational patterns
of container liner shipping.
