Leaving behind a sluggish FY21; U/G to HOLD
4Q21 throughput volumes will likely be affected by the recent tropical storm as WPRTS saw workforce capacity reduced to 30% in its aftermath. As its share price has declined by c.10% since the CM announcement and with the finalisation of the “W2” concession on the horizon, we now deem the risk-reward ratio to be balanced. We upgrade WPRTS to a HOLD with a lower DCF-based TP (WACC: 7.5%, LTG: 2%) of MYR3.92 (-4%) on the back of a 3.5%/2% cut in our throughput volume growth estimates for FY21/22E.
Bearing the brunt of Tropical Depression 29W
The anomalous tropical storm brought heavy precipitation and flooding to key areas in the Klang Valley on 17-18 Dec. Whilst WPRTS’ infrastructure was spared from damage, the surrounding area of Pulau Indah was adversely affected by the floods and this prevented workers from reporting for duty. Consequently, the port had to operate at 30% workforce capacity in the immediate aftermath which in turn, resulted in berthing delays and significant productivity loss. Mgmt had guided that workforce
capacity would only return to >90% levels just after Christmas.
FY21 throughput volumes likely to be flat YoY
Mgmt had also disclosed that WPRTS’ container throughput as of 18 Dec stood at 10.1m TEUs. This translates to an avg weekly run-rate of 202K TEUs and an est. annual throughput of c.10.5m TEUs FY21, falling well short of our post-3Q21 full-year estimate of 10.9m TEUs. As such, we are lowering our throughput growth and core NP projections for FY21E/22E to 0.5%/2% (from 4%/4%) and 5%/8% respectively (see Figure 1 below).
Negatives already priced-in; key catalyst ahead
Prior to the flood, persistent yard congestion (>90% utilisation) threatened to hamper WPRTS’ FY21 container growth owing to regional lockdowns in neighboring ports. Although it’s unlikely to dissipate in the near-term, effective mgmt had allowed WPRTS to register a commendable 3% YoY growth for container volumes for 9MFY21. However, with the recent share price decline (-16% from 1 Nov-21 Dec), we opine the retracement has run its course and despite muted prospects heading into FY22, the pending
finalisation of the “W2” concession agreement in 1Q22 could be a key rerating catalyst moving forward. U/G to HOLD on balanced risk-reward.