TRANSPORTATION & LOGISTICS

WESTPORTS HOLDINGS
(WPRTS MK EQUITY, WPHB.KL) 22 Mar 2021

Acquiring 50% stake in Port Klang cruise terminal

Company report BUY
AmInvestment Bank (Maintained)
www.amequities.com.my
03-2036 2240 Rationale for report: Company update

Price RM4.41 Investment Highlights

Fair Value RM5.07
52-week High/Low RM4.69/RM3.12  We maintain our forecasts, but tweak our fair value up by
Key Changes 3% to RM5.07 (from RM4.92 previously) to adjust for a
Fair value 
premium to reflect a 4-star ESG rating as appraised by us
EPS  (Exhibit 1). We value Westports at 23x its revised FY22F
EPS, which is in line with its average historical forward PE.
YE to Dec FY20 FY21F FY22F FY23F We believe the throughput of seaports, Westports included,
Revenue (RM mil) 1,975.0 1,980.9 2,172.8 2,260.5
will continue to grow in 2021 as global trade recovery gains
Core net profit (RM mil) 667.3 688.4 730.3 775.8 further momentum, backed by the reopening of economies,
FD Core EPS (sen) 19.2 20.2 21.4 22.8 businesses and borders. Maintain BUY.
FD Core EPS growth (%) 10.8 5.2 6.1 6.2
Consensus Net Profit (RM mil) - 708.1 760.6 817.2  Westports and Northport (Malaysia) Bhd (a 99.1%-owned
DPS (sen) 11.5 15.1 16.1 17.1 unit of MMC Corporation) are acquiring a 50% stake each in
PE (x) 22.5 21.8 20.6 19.4
Boustead Cruise Centre (BCC) from Boustead Holdings,
EV/EBITDA (x) 12.3 11.1 9.7 8.1
Div yield (%) 2.6 3.4 3.6 3.9 free of liability and guarantee, for RM115mil cash each (or
ROE (%) 18.5 13.5 11.5 10.1 RM230mil in total). BCC owns and operates a cruise
Net Gearing (%) 18.4 25.1 27.5 29.5 terminal sitting on some 69.8 acres of predominantly sea-
fronting land in Port Klang, providing port facilities and
Stock and Financial Data
services to cruise and navy vessels.
Shares Outstanding (million)
Market Cap (RM mil)
3,410.0
15,038.1
 We are mildly negative on the acquisition. We do not see
Book Value (RM/share) 0.83 much synergy between operations of a cargo port and a
P/BV (x) 5.3 loss-making cruise ship terminal. BCC reported net losses
ROE (%) 18.5 of RM7.6mil, RM3.8mil and RM14.7mil during non-pandemic
Net Gearing (%) 18.4 years in FY17–19 (Dec). Its net loss (unaudited) widened to
Major Shareholders Pembinaan Redzai (42.4%) RM54.5mil in FY20.
South Port Investment
Holdings(23.6%)
 Having said that, we take comfort that:
EPF(6.3)
1. It is a very small acquisition to Westports (vs. its
Free Float 28.2
Avg Daily Value (RM mil) 7.2 existing market cap of RM15.6bil);

Price performance 3mth 6mth 12mth 2. At RM230mil in its entirety, BCC is priced at a 23%
discount to its adjusted unaudited net asset of
Absolute (%) (1.8) 11.1 12.5 RM299.6mil, based on an independent revaluation on 31
Relative (%) (1.4) 2.9 (9.8) Dec 2020, valuing the land, buildings and jetty of BCC
at RM289mil (vs. Boustead Holdings’ original
5.0 2,000
acquisition cost of RM310mil in 2014). Specifically, the
4.5 1,800
vacant land was valued in the independent revaluation
4.0 1,600
at RM61 per sq ft, which is comparable to the going rate
3.5 1,400
of RM50–75 per sq ft in the surrounding area; and
3.0 1,200
2.5 1,000 3. The land, of which 58 acres are sea-fronting, has
2.0 800 potential for logistic services and port development.
1.5 600
1.0 400
 The acquisition will increase Westports’ net debt and
gearing to RM521mil and 0.18x respectively as at 31 Dec
0.5 200
2020 to RM636mil and 0.22x, which are still highly
0.0 0
Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 manageable. Assuming BCC’s net loss in FY21F is to match
that of FY20, i.e. RM54.5mil, Westports’ half share of
WPRTS MK FBMKLCI Index RM27.3mil shall erode our FY21F forecast by about 4%.
Westports Holdings 22 Mar 2021

 The less-than-encouraging acquisition aside, looking beyond the pandemic, the outlook for the port sector in the
region (Malaysia included) is resilient, underpinned by global trade and investments in the manufacturing sector that
generate tremendous inbound (feedstock) and outbound (finished product) throughput for ports. There have been
significant relocations of the manufacturing base by multi-national companies out of China to the region due to the
rising labour and land costs, exacerbated by the US-China trade war. Westports has charted a long-term expansion
plan to capitalise on these.

EXHIBIT 1: ESG RATING

Overall ★ ★ ★ ★
Zero-carbon initiatives ★ ★ ★
Pollution control ★ ★ ★
Sustainable industrialization ★ ★ ★ ★
Diversity and inclusion ★ ★ ★ ★
Employees welfare ★ ★ ★ ★
Corporate social responsibilities ★ ★ ★
Accessibility & transparency ★ ★ ★ ★
Supply chain auditing ★ ★ ★
We accord a discount/premium of -6%, -3%, 0%, +3% and +6% on fundamental fair
value based on the overall ESG rating as appraised by us, from 1-star to 5-star

EXHIBIT 2: PB BAND CHART EXHIBIT 3: PE BAND CHART

7.00 30.00

6.00 25.00
+1δ
+1δ
5.00 Avg Avg
-1δ 20.00 -1δ
4.00
15.00
3.00

10.00
2.00

1.00 5.00

0.00 0.00
Jan-17
Mar-17
May-17

Jan-18
Mar-18
May-18

Jan-19
Mar-19
May-19

Jan-20
Mar-20
May-20

Jan-21
Jul-17
Sep-17
Nov-17

Jul-18
Sep-18
Nov-18

Jul-19
Sep-19
Nov-19

Jul-20
Sep-20
Nov-20

Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21

AmInvestment BankBhd 2
Westports Holdings 22 Mar 2021

Source: Company, AmInvestment Bank Bhd estimates

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