The expansion of the terminals follows Westports securing a 58-year extension until 2082 to its concession agreement with the government.
PETALING JAYA: Maybank Investment Bank (Maybank IB) Research says it is optimistic about Westports Holdings Bhd
’s outlook, driven by the group’s sustained growth in intra-Asia trade and increasing foreign direct investments in Malaysia.
Furthermore, the research house said the long-awaited expansion of Westports’ container terminals 10 to 17 (CT10-17) improves the port operator’s growth prospects.
The expansion of the terminals follows Westports securing a 58-year extension until 2082 to its concession agreement with the government.
Wholly-owned subsidiary, Westports Malaysia Sdn Bhd (WMSB) entered into a third supplemental privatisation agreement with the government and Port Klang Authority for the extension of its concession last week.
The third supplemental privatisation agreement covers existing and new port facilities, including a sustainable development plan for the container terminals. This expansion aims to increase port capacity from 14 million twenty-foot-equivalent units (TEUs) to 27 million TEUs by 2053.
The expansion will involve an initial capital expenditure (capex) of RM12.6bil, with preliminary construction to start in January 2024.
Westports plans to fund the expansion through a mix of internally generated funds, new equity and a proposed RM5bil sukuk programme.
“In our forecasts, we project a total capex of RM39.4bil until 2082, in line with guidance on annual maintenance and facilities upgrade capex of RM450mil to RM500mil. Additionally, we anticipate a 30% increase in container tariffs in the financial year 2027 (FY27), coinciding with the start of CT10’s operations.
“Our assumptions include moderate 1%-2% a year long-term growth for container throughput,” Maybank IB Research said in its reportThe research house said the long-awaited CT10-17 expansion extends Westports’ growth prospects.
“With a net gearing of 0.15 times at end-FY22, it has substantial debt capacity, supported by a robust free cash flow of more than RM800mil a year. An equity call is only anticipated in 2027. Our current forecasts have factored in a dividend reinvestment plan for FY26 and FY27,” the research house added.
Westport’s net profit for the third quarter ended Sept 30, 2023, increased to RM195mil compared with RM150.39mil in the same period last year. Revenue rose to RM542.31mil from RM520.54mil, while earnings per share stood at 5.72 sen versus 4.41 sen previously.
The port operator attributed the higher revenue to a rise in container revenue, which contributed to the improved net profit, as well as a reduction in sales and administrative expenses.
For the nine-month period ended Sept 30, 2023, Westport’s net profit grew to RM575.35mil against RM464.54mil in the same period last year, on the back of revenue rising to RM1.60bil from RM1.55bil previously.
