Higher container yield boost results
MYR735m FY21 CNP was above our expectation but within consensus at 103%/91% respectively; the former, from much higher blended container yield on higher VAS revenue (extraordinarily high demand for reefer and storage needs) and a slight improvement in container handling charges. We tweaked up FY22-23E EPS on better container yield assumptions and introduce FY24E. Maintain HOLD with a new DCF-TP of MYR3.99 (WACC: 7.5%, LTG: 2%); stock is fairly-valued at 12M fwd PER of 21.0x (5Y mean:
21.4x), 3.6% FY22E DY. A 2nd interim DPS of 9.28sen brings FY21 to 18sen.
Core net margin improved, but might not sustain
4Q21 revenue of MYR494m (ex- construction revenue) improved by 4% YoY despite an 11% YoY container throughput volume fall, as blended yield ballooned to MYR176/TEU (+18% YoY). Conventional revenue rose 4% YoY on higher break bulk ingot volume and RORO units handled. 4Q21 CNP jumped 17% YoY to MYR191m as core net margin improved from lower admin expenses, finance costs (after MYR150m Sukuk repayment in 2021) and tax rate (reversal of deferred taxes). This is despite the 63% surge in fuel costs YoY as oil price trended higher. Notwithstanding the good results, the VAS revenue surge and lower costs may not sustain.
Yard congestion hurts operational capacity
FY21 container throughput volume declined 1% YoY (gateway: -3% YoY; transhipment: 0% YoY) despite high demand from shipping lines as handling capacity was constrained by yard congestion. Yard congestion has since eased, at c.85-90% utilization in Jan 2022, vs. 95% in 4Q21. Into FY22E, guidance is for a flat-to-low single digit container volume growth, assuming logistics bottleneck eases by 2H22. Jan MTD, Westports has seen slightly lower container volume handled YoY. We project a small 2% container throughput volume growth in FY22E, in line with guidance.
Maintain HOLD; risk-reward balanced
WPRTS’s near term catalyst is lacking; risk-reward is balanced. While the easing of port congestion could provide some upside to throughput volume, this could come at lower margins (vs. higher margins from VAS revenue). Also, higher fuel costs will further pressure margins. W2 expansion plan progress remains highly uncertain, which could delay WPRTS’s recovery from the pandemic-led supply chain disruptions.