KENANGA Research upgraded its call on Westports Holdings Bhd to "outperform" from "market perform", with a higher target price (TP) of MYR3.80 (US$0.81) from MYR3.65 previously, after the group beat market expectations in its financial results for the cumulative nine months ended September 30, 2023 (9MFY2023).
In a note, the research house raised its FY2023 net profit forecast by 6 per cent, and 7 per cent for FY2024, as it expects container volume growth rates to grow 6 per cent in FY2023 and 4 per cent in FY2024 (from 1 per cent and 3 per cent previously).
Notably, Westports' revenue rose 3 per cent year on year for 9MFY2023, on stronger container volume, which was partially offset by a lower average revenue per TEU, on lower storage income as port congestion eased.
Core net profit surged by 23 per cent, due to lower diesel fuel cost, lower finance cost, and the normalization of the effective tax rate to 22.8 per cent in the absence of the prosperity tax, according to The Edge Malaysia.
Quarter on quarter, Westports posted a slight improvement in container volume, partly offset by lower average revenue per TEU (-2 per cent). Core net profit was similarly dragged by higher diesel fuel cost and finance cost.
Based on guidance from the results briefing, FY2023 container volume is expected to grow by 5 per cent to 10 per cent (versus 0 per cent to 5 five estimated previously) on robust intra-Asia trade, driven by an increase in direct investment from China, such as container volume related to recycling paper mills and solar panel manufacturers.
In the latest quarter, the empty container box level normalized (at 27 per cent of total containers, versus 29 per cent three months ago), as the empty containers had mostly been shipped out to China.
"The intra-Asia container volume rose 5 per cent quarter on quarter, which indicated that some of the boxes had been put back into circulation," it said.
Kenanga noted that port congestion had ended, as reflected in the normalization of its container yard utilization to the optimal level of about 80 per cent.
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