KUALA LUMPUR: Westports Holdings Bhd, Malaysia's premier marine port, is well positioned to seize upon the expected uptick in trade activities.
This is underpinned by the burgeoning growth of Malaysia's electrical and electronics (E&E) sectors, along with its robust commodities exports, according to RHB Research.
The investment bank stated its preference for Westports among the infrastructure players, citing a shift in optimism regarding the country's and region's trade prospects.
RHB Economics also reaffirmed its optimistic stance on Malaysia's trade prospects for 2024, supported by a brighter global and regional economic landscape, the bolstering economic performance of China, as well as the resurgence in the global technology cycle.
It noted that growth potential in the E&E sector, which is approximately 40 per cent Malaysia's exports, should boost the country's drive to attract more inward foreign direct investment (FDI).
"The government has instituted a range of initiatives and incentives aimed at stimulating FDI, such as tax incentives, reinvestment allowances, relocation incentives, and regulatory streamlining.
"These measures aim to bolster Malaysia's FDI inflows relative to nominal gross domestic product (GDP), which has generally exceeded those of other emerging markets in Southeast Asia, underscoring its growth prospects.
"We believe that Westports will be the primary beneficiary of these developments, particularly given that the intra-Asia segment accounts for 65 per cent to 67 per cent of the group's throughput volume," it added.
Following the remarkable surge in container volume witnessed in December 2023, RHB Research anticipates that the momentum will persist into the first quarter of the financial year 2024 (1QFY24).
Container volume is expected to remain within the 2.3 million to 2.8 million twenty-foot equivalent unit (TEU) range.
This is primarily underpinned by a robust recovery in trade activities both domestically and across the intra-Asia region.
As such, the investment bank estimates 1Q24 to see a year-on-year (YoY) improvement, pencilling a core net profit within the range of RM195 million to RM200 million.
Additionally, RHB Research has also stated that the incoming Westports 2 is sufficient to cater to long-term demand.
"Currently operating nine container terminals with an annual capacity of 14 million TEUs, this expansion plan is set to double Westports' annual TEUs to 27 million over a projected 20-year period.
"The first phase, starting from CT10–13, will commence after the land reclamation process, which is estimated to take about two years.
"Based on our latest channel checks, CT10 and CT11 should be ready to operate by the first half of 2028 and the second half of 2029 (1H28–2H29)," it noted.
On that note, RHB Research has upgraded Westports' rating from "neutral" to "buy" and set a new target price of RM4.52, up from RM4.12 previously.
As the investment bank became more optimistic about the region's trade prospects, it also raised its FY24–FY26 forecast earnings and container assumptions for Westports by four per cent to 4.5 per cent and six per cent to 16 per cent respectively.
It has also upgraded Westports' environmental, social, and governance (ESG) score to 3.1 from 2.8, encouraged by its green initiatives and decarbonisation efforts via electrification of terminal operating equipment.
