KUALA LUMPUR – Westports Holdings Bhd’s approved new container terminal (CT) expansion project is viewed as a long-term play for the group, thus ruling out any earnings accretive development over the next few years, Kenanga Research said.
In a note today, it said total capital expenditures for Westports Phase 2, comprising eight terminals (CT10-17), would be RM10 billion, and the new CTs are expected to nearly double capacity to 27 million twenty-foot equivalent units (TEUs) from 14 million TEUs over 20 years.
The CTs are anticipated for full completion by 2040.
“The global supply chain is adjusting to a combination of factors, such as higher consumer demand for containerised goods in Western economies, lockdowns and a global supply chain adjustment adhering to Covid-19 precautionary measures,” it said.
Nevertheless, Kenanga Research noted that last month, yard utilisation rate was above 100% due to lockdowns, with no movement of local container as Westports charged lower rental compared with outside-ports warehouses.
It has maintained the target price of RM4.20 for the stock, based on a 6.2% discounting rate, 1.5% terminal growth and dividend payout policy of 75%.
Echoing similar projections, AmInvestment Bank said only minimal progress was made during the second quarter of this year (Q2) with regard to Westports’ expansion plan comprising CT10-17.
“The land use conversion and negotiation with the government on the concession terms are still in progress,” it said, adding that the company will continue to boost its current capacity via its recently completed CT9 Container Yard Zone Z over the immediate term.
AmInvestment said Westports also plans to add an additional 7.68ha container yard at CT8 by Q4 amid the current high utilisation at the yard.
“Apart from that, it has placed orders for 21 new rubber tyred gantry cranes for the new container yard while two replacement quay cranes delivery are expected to be delayed slightly to Q1 2022.
“We believe the throughput of seaports, Westports included, will continue to grow in 2021 as global trade recovery gains further momentum, backed by the reopening of economies, businesses and borders,” it said.
Looking beyond the pandemic, it projected the outlook for the port sector in the region would be resilient, underpinned by global trade and investments in the manufacturing sector that generate tremendous inbound and outbound throughput for ports.
“There have been significant relocations of the manufacturing base by multinational companies out of China to the region due to the rising labour and land costs, exacerbated by the United States-China trade war,” it said.
AmInvestment added that Westports has charted a long-term expansion plan to capitalise on these relocations. – Bernama, August 2, 2021
