Westports is finalising a multi-year dividend reinvestment plan to raise equity funds for the expansion.
PETALING JAYA: Maybank Investment Bank (Maybank IB) Research expects the cargo volume growth for ports in Malaysia to sustain going into 2025.
This growth will be supported by strong foreign direct investment (FDI), domestic direct investment (DDI) and rising intra-Asia trade.
“Into 2025, we also expect more updates on port infrastructure developments, especially on the Pulau Carey Port concession in Selangor,” the research house said in its latest outlook report.
It highlighted that upgrading port infrastructure is crucial to support rising FDI/DDI and local manufacturing activities, with ports serving as the main gateways for imports and exports.
Specifically on Westports Holdings Bhd
, Maybank IB Research said dredging and land reclamation for CT10-17 (Westports 2.0) should go into higher gear in 2025, which would double total capacity from 14 million twenty-foot equivalent units (TEUs) to 27 million TEUs.
It added that the groundbreaking was held on Sept 27, 2024, while land clearing had commenced with the target for CT10 to start operations by the third quarter of 2028 (3Q28).
Westports is also finalising a multi-year dividend reinvestment plan to raise equity funds for the expansion.
According to Maybank IB Research, higher trade volume (imports and exports) and port infrastructure upgrades and expansions are also positive for local logistics players, such as Swift Haulage Bhd, Tasco Bhd and Tri-Mode System (M) Bhd.
However, the sector faces competition from an overcrowded and fragmented market, thus, squeezing margins, it added.
Meanwhile, Maybank IB Research also noted that the shipping industry is undergoing reshuffling of alliances, effective Feb 1, 2025.
Mediterranean Shipping Co (MSC) will exit its eight-year alliance (known as 2M) agreement with Maersk to operate a standalone East-West network covering key global trade lanes.
Maersk and Hapag-Lloyd, which was formerly part of THE Alliance, have formed the new Gemini Cooperation, adopting a Hub and Spoke model to enhance global connectivity.
The remaining members of THE Alliance (namely ONE, HMM and Yang Ming) will rebrand as the Premier Alliance, focusing on major East-West trades and collaborating with MSC on a slot exchange programme for Asia-Europe services.
Separately, MSC and ZIM have announced a new cooperation targeting Asia-US East Coast and Gulf trades.
“We believe these restructuring (efforts) present more opportunities than risks for Westports, which has reduced its reliance on transshipment volumes (now 55% of total volume versus over 70% pre-2017),” said Maybank IB Research.
During the 2017 shipping alliance reshuffle, Westports saw a 9% year-on-year drop in total container throughput as some services shifted to Port of Singapore Authority instead.
However, in this round, Westports’ East-bound trade is not affected, via the unaffected Ocean Alliance, and it has no direct exposure to the 2M Alliance, said Maybank IB Research.
Additionally, Westports is also positioning to attract new services from the Premier Alliance.
“While initial volume gains may be modest, these new partnerships would enhance network opportunities and support future growth as Westports 2 becomes operational,” the research house added.
That said, Maybank IB Research expects transshipment volume growth at Westports will likely remain constrained until CT10 becomes operational in 3Q28, given its rather high terminal utilisation of 78% as of 3Q24.
Westports is the sector’s top buy for the research house, supported by sustained intra-Asia trade demand and rising FDI/DDI in Malaysia, driving higher tariffs and resilient gateway container volume growth.
The upside potential included a higher- than-expected gateway versus transshipment volume mix and an earlier-than- anticipated tariff revision.
“Our forecasts assume a 41% gateway container mix in financial year 2025 (FY25) compared with 45% in 3Q24, with a tariff hike expected only in FY27,” the research house added.
The risks included abrupt shifts in trading routes due to shipping alliance reshuffles or geopolitical risks, as well as a significant global economic slowdown which could reduce container and freight volumes, impacting earnings of port operators such as Westports and logistics players.
Conversely, earnings could benefit from a higher-than-expected gateway volume mix at Westports (boosting margins) and increased haulier demand, as well as accelerated FDI driven by geopolitical dynamics.
