Westports Holdings 20151217 (Initiation)

M a l a y s i a Thursday, 17 December 2015
INITIATE COVERAGE
Westports Holdings (WPRTS MK) SELL

Incoming Risks On The Back Of Lower Growth Phase In Container Growth
Share Price RM3.93
Initiate coverage with SELL and target price of RM3.30 (16% downside). While
Westports promises decent long-term growth, we anticipate near-term earnings Target Price RM3.30
vulnerability. Aside from shipping consolidation uncertainties, we expect more Upside -16.1%
derating catalysts namely: a) past effects of market share gains and additional O3
Alliance business may wane, on future capacity constraints (based on concession
COMPANY DESCRIPTION
terms), b) weakness in gateway offsets tariff hike, and c) slower global trade outlook.
An integrated facility situated at the Port
 The best proxy to Port Klang. Westports Holdings (Westports) is a Malaysian port Klang, Malaysia’s premier port. It offers
operator based in Port Klang, partly owned by Li Ka Shing. Strategically positioned in the container-handling, dry bulk, liquid bulk
Straits of Malacca, its deepwater facility functions as a key transshipment hub and its and other conventional cargo services.
hinterland comprises Malaysia’s most concentrated commercial and industrial regions.
 Past is not representative of the future’s lower growth phase. Its past above- STOCK DATA
industry growth was partly due to market share gains from Northport and PSA Singapore
GICS sector Industrials
(PSA). It benefitted from volume aggregation from O3 Alliance, its single largest customer
cluster (55% of throughput). We bear in mind the CT8/CT9 capacity growth is slower on Bloomberg ticker WPRTS MK
a high base (future 5-yr CAGR of 5% up to 16m TEUs long-term, vs 10% in the past). Shares issued (m) 3,410.0
CT9 is the last expansion based on the terms of its current concession. A peakish >80% Market cap (RMm) 13,367.2
terminal utilisation may not help to retain the 9% container throughput CAGR.
Market cap (US$m) 3,087.4
 Weakening gateway revenue may offset net tariff hike impact. Gateway
3-mth avg daily turnover (US$m) 3.8
(import/exports) container volume contracted 5% in 3Q15. We expect this trend to
persist, as the weakness in the Malaysian economy may last until 1H16. We project this Price Performance (%)
high-yielding business to decline to 26% of container throughput in 2016 (2014: 29%).
52-week high/low RM4.50/RM3.26
The volume contraction may offset a 5-6% annual net yield boost from the recent 15%
tariff hike. We expect the net tariff hike effect to be moderate, given ongoing rebates and 1mth 3mth 6mth 1yr YTD
rates being revised progressively on contract renewals (3-4 year average tenure). (9.8) (9.6) (11.1) 21.8 14.6
 Transshipment volume may also see growth moderate. Container volume in the
Major Shareholders %
Straits of Malacca (Port Klang, Tanjung Pelepas Port (PTP) and PSA saw a >5%
contraction in Oct 15. While the impact is not apparent yet in Westports (due to market Gnanalingam Family 45.5
share gains), O3 Alliance recognises this risk and is cutting capacities starting from the Hutchison Whampoa Ltd 23.6
Asia-Europe route.
FY15 NAV/Share (RM) 0.55
 Near-term earnings risk. Our RM3.30 target price is based on a 10% discount on DCF
valuation to 2054, at implied 21x 2016F PE and 3.6% dividend yield – the discount is FY15 Net Debt/Share (RM) 0.24
premised on a derating from near-term earnings vulnerability (our forecasts is 13%
below street’s). Beyond a weak 2016, Westports offers long-term potential which may be PRICE CHART
supported by Malaysia’s Masterplan for Ports, TPP Agreements, and further port
WESTPORTS HOLDINGS BHD
developments in Port Klang. Note that we currently do not assume inorganic growth and (lcy)
WESTPORTS HOLDINGS BHD/FBMKLCI INDEX
(%)
5.00 160
uncertainties from existing shipping consolidation trends. However, peer valuation
150
suggests that Westports is expensive on PE and EV/EBITDA (despite having superior 4.50
140
ROEs). A scenario analysis suggests a target price range between RM2.96-4.40.
4.00 130
KEY FINANCIALS 120

3.50
Year to 31 Dec (RMm) 2013 2014 2015F 2016F 2017F
110
100
3.00
Net Turnover 1,348 1,503 1,590 1,751 1,911 90
EBITDA 689 789 893 945 1,054 2.50 80
Operating Profit 564 643 738 777 869 100
Volume (m)
Net Profit (Reported/Actual) 435 512 501 527 592 50
Net Profit (Adjusted) 406 441 501 527 592
EPS (sen) 11.9 12.9 14.7 15.5 17.4
0
Dec 14 Feb 15 Apr 15 Jun 15 Aug 15 Oct 15 Dec 15
PE (x) 33.0 30.4 26.7 25.4 22.6 Source: Bloomberg
P/B (x) 8.4 7.6 7.1 6.6 6.2
EV/EBITDA (x) 20.2 17.7 15.6 14.8 13.2
Dividend Yield (%) 10.8 2.9 2.8 2.9 3.3
Net Margin (%) 32.3 34.1 31.5 30.1 31.0
Net Debt/(Cash) to Equity (%) 34.8 40.0 43.0 48.0 52.1 ANALYST
Interest Cover (x) 14.6 12.3 12.7 12.8 13.2 Kong Ho Meng
ROE (%) 28.2 30.4 27.4 27.0 28.3
+603 2147 1987
Consensus Net Profit - - 516 607 663
UOBKH/Consensus (x) - - 0.97 0.87 0.89 homeng@uobkayhian.com
Source: Westports, Bloomberg, UOB Kay Hian
Refer to last page for important disclosures. 1

Investment Highlights/Summary
The best proxy to Port Klang. Westports is a Malaysian port operator based in Port Klang,
partly owned by Li Ka Shing. Strategically positioned in the Straits of Malacca, its deepwater
facility functions as a key transshipment hub and its hinterland comprises Malaysia’s most
concentrated commercial and industrial regions
Past effects of market share gain unlikely to persist. Westports had enjoyed better-than-
industry growth due to market share gains from: a) direct competitor NCB (Westports’ share
of container volume in Port Klang rose from 44% in 2002 to 76% in 9M15, while Port Klang
maintained its dominance of close to 50% market share amongst the 10 ports in Malaysia),
and b) from other ports in Straits of Malacca (SOM), with share of container volume
increasing from 8% in 2002 to about 16% currently. We believe this is also partly due to
additional business from its key customers and shipping alliances. According to CMA CGM,
the O3 Alliance allowed it to maximise the use of its ports hub in Port Klang and provide
additional 0.4m TEUs in volume. There is also evidence that container lines might have
switched from using PSA (Singapore) to the Malaysian ports, due to ongoing shipping
consolidation and the attraction of cheaper Malaysian tariff/costs. All in, Westports’ terminal
utilisation increased to 5-year high of >80% (past 5-year average: 77%), which we believe
may limit headroom for intake of significant additional volume.
Weakening gateway growth, with a contraction (-5% yoy) in 3Q15. Pending management
guidance, we expect this trend to persist, as a weak Malaysian economy may only rebound
towards late-16. We project this high-yielding business to decline to 26% of container
throughput in 2016 (2014: 29%). This is a potential derating catalyst, as the effect of a
contraction in gateway throughput will have a greater impact on revenue, given this is a
higher-yielding segment (due to its end destination, it is generally less likely to be lost to
competitors and is less price-sensitive vs transshipment throughput). We project every 1%
change in container throughput (arising from gateway only) will change PAT forecasts by 3%.
Global growth slowdown could affect ports with high transshipment exposure.
Westports has enjoyed high growth in its transhipment container volume (70% of total
container volume, vs gateway), which is influenced by global trade outlook. We believe the
recent weaknesses in global growth and China’s economy slowdown could still be a key risk
for Westport’s transshipment business in 2016. This was re-iterated in Maersk’s 3Q15
earnings guidance as it reduced its container demand growth outlook for the same reasons.
Container volume in the Straits of Malacca (Port Klang, PTP and PSA) already saw a >5%
contraction in Oct 15. Recall that during the 2009 global recession, Westports’ container
throughput contracted and terminal utilisation fell to a low of 59%. While this potential 2016
risk is likely to be temporary, we still project Westports’ long-term container throughput
CAGR at 6.0% through 2014-20 (which is lower than 2008-14’s CAGR of 9.0%), which will
come close to its future capacity growth of 5% CAGR (vs 10% in the past).
Planned tariff hike may not as exciting as expected. The Ministry of Transport (MOT)
approved an upward revision of container tariff rates, which was long expected as a key re-
rating catalyst. The first phase (+15% increase) is effective Nov 15, while the second phase
(+15% increase) was expected to be effective Sep 18. However, bearing in mind that the
15% is on maximum published tariff rates, we believe the 15% tariff hike will provide only a
moderate effect, at an overall CAGR of 5-6% to the blended net TEU yield (1.54 times of
container yield) in 2015-18. We assume that: a) the net yields (after rebates) for
transshipment depends on contract renewal – rates are locked in contract terms which can
range between 1-5 years’ tenure (average 3-4 years), b) For gateway, the 15% tariff hike on
net yield is immediate, but does not apply to empty container load (empty comprises about
15-20% of total container TEUs). We note that blended net yields for transhipment have
historically been at 8-9% discount to average published tariffs. While gross container yields
will be boosted by 11% immediately in 2016 following the tariff hike, we see the net yield hike
(after rebates) will only be progressive within the next three years, taking into account
ongoing rebates and our assumption of a slower growth in high-yield gateway.

We have a contrarian conservative view on capacity growth. While CT8/CT9 expansion

can raise capacity to 16m TEUs (+45% from 11m TEUs of CT1-CT7 in 2015), the core
combined capacity of CT8/CT9 is merely 3m TEUs, and the additional 2m TEUs capacity is
from further injection of quay cranes for all of CT1-CT9 based on FY13’s investor
presentation. The latter is subject to market conditions. We have a contrarian view that
Westports is in no rush to upgrade its capacity to 16m TEU (we are looking at 2022 target vs
market views of 2020), as we assumed a moderate long-term demand growth expectation.
Our capacity growth assumption implies 2014-22 capacity CAGR of 4.8%, vs 2008-14 CAGR
of 10.6%.
Fully priced in, earnings vulnerability in the horizon. Westports has been trading at a
relatively steady RM3.90-4.40 levels since Apr 15, with an outperformance of >20% to the
KLCI. However in summary, we see earnings vulnerability that may lead to a slower growth,
due to aforementioned factors such as: a) more moderate container growth, b) persistent
weakness in gateway (imports/exports) container volume may offset tariff hike effects, and c)
container volume in the region has contracted, which may affect transhipment outlook.
Peer valuation suggests that Westports is overvalued on PE and EV/EBITDA. Against
international port operators, Westports is trading at a 27% premium to average PE and 36%
premium on EV/EBITDA. Despite its superior ROEs of 26% vs industry’s 8-9%, we expect
this gap to narrow as we project slower near-term earnings shortfall. Our scenario analysis
suggests a target price range between RM2.96-4.40, depending on various assumptions
such as long-term container growth, the ability of Westports to negotiate for higher yields,
cost management, and WACC.
Mega trade developments are not near-term catalysts. The government has laid out a
three-stage MasterPlan to develop the local logistics and trade industry, which includes
developing freight hubs and Port Klang as a regional footprint. Key targets for the Masterplan
include: a) boosting CAGR for national cargo volume to 8% (from 5.5% expectations) by
2020, b) improving labour productivity, and c) increasing the sector’s contribution to national
GDP to 4.3% from the current 3.6%. The TPPA and the Maritime Silk Road ambitions could
enhance the prospects of trade flows and ports, and may also be a boost to Westports’ high-
yield gateway business. However, these are all long-term events, and the time taken for
implementation and the structure of any benefits are still uncertain.
We have not factored in other uncertainties. We do not price in inorganic growth in our
assumptions. Other uncertainties may involve: a) privatising other Federal /government-run
ports could generate competition, b) unanticipated changes in government regulations, c) the
Malaysian government could call for development of a third port on an available land in Port
Klang in future, but this is only a very long-term event and will likely require an open tender to
players like Westports and NCB. d) huge capacity expansions from regional ports i.e. PSA
(50% increase in capacity targets to 50m TEUs by 2017), PTP (45% boost from current
capacity to 15m TEUs by 2018) and Indonesia (some ports will double their current
capacities) may alter competitive landscape on the longer term, and e) uncertainties in
shipping consolidation.
Some shipping consolidation events that are expected by the market are CMA CGM
buying over NOL from Temasek, and the merger of China shipping lines CSCL and COSCO.
Westports could either benefit or lose out in container volume depending on the shipping
customers’ decision on throughput allocation to the ports. We think any upside benefit may
be capped by Westports’ future capacity, which may not allow it to absorb significant
throughput from additional customers, versus other major ports that have more incremental
capacity additions. The downside risk is that major shipping lines are pushing for multiple
hub strategies, which is part of the effects of consolidation. By acquiring NOL, CMA CGM
had committed to “increase container volume with PSA and shift some volumes away from
other hubs, as it makes sense to establish a strong base in Singapore”. CSCL’s plans to “exit
the container box business (shift from liners to leasing) by consolidating the business to
COSCO”, is also an uncertainty to the O3 Alliance’s future demands. The timeline will likely
take 1-2 years, as the existing shipping alliance agreements and terms will stay with a one-
year notice of withdrawal, if any. These will not result in any financial impact on Westport’s
2016 earnings, but may impact throughput growth from FY17.

Valuation
Initiate coverage with SELL and a target price of RM3.30, implying a 16% downside to
current price. Our target price is based on a 10% discount on our full DCF valuation to 2054.
We believe that the stock has fully priced in the long-term potential of its current and
additional capacity plans – valuations may adjust to more realistic assumptions given
weaknesses in near-term global trade growth may become more pervasive by 2016.
Westports had enjoyed above-industry growth in the past as it captured more market share
from Northport and as O3 Alliance itself had grown and provided additional business to
Westports since its 2014 formation – i.e. these effects are not solely from organic real
container transportation growth, and will not be sustainable given future capacity constraints.
Dividend yield. Our target price implies a high 21x 2016F core PE (at 2-year historical PE,
and excluding tax allowance), 5.6x 2016F P/B, and 14.2x EV/EBITDA. Dividend yield is
implied at 3.6%, based on 75% dividend payout policy.
DCF valuation. Good visibility of Westports’ cash flows and concession terms makes DCF
approach our preferred valuation methodology. Our cost of equity of 8.6% is based on 4.5%
risk free rate, market risk premium of 10.3% and a beta of 0.7x. Our beta assumption is
higher vs current Westports’ and industry average of 0.5x. Our growth assumptions factor in
the slowdown in container growth relative to the structural shift in the huge expansion of
capacities of regional ports within the SOM. Taking into account Westports’ capacity plans,
we have applied a two-stage DCF namely:
a) Stage 1 (2015-29): Container growth up till 85% of Westports’ maximum capacity of 16m
TEUs (based on its current concession terms, where CT9 is the final capacity expansion).
Our implied EBITDA CAGR is at 5.2%; and
b) Stage 2 (2030-54): Absence of major expansion with minimal maintenance capex,
EBITDA CAGR at a low 1.1%, except for 2031-34 and 2046-49 where we have assumed
subsequent rounds of tariff hike may take effect. We assumed small capacity increment
up till the max of 59k TEU/hectare and 182k TEU/crane, due to technology improvisation
to maximise container handling on land space provided. These are port indicators of the
“usage of space” provided in the concession. These do not assume inorganic M&A
activities, or potential expansion beyond CT9 in Port Klang.
FIGURE 1: STAGE 1 DCF

(RMm) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
EBITDA 893.3 945.0 1,053.8 1,136.5 1,312.3 1,455.7 1,411.6 1,522.0 1,539.6 1,601.0 1,614.6 1,675.0 1,737.7 1,802.7 1,870.1
- Tax Shield (167.0) (175.7) (197.3) (212.4) (251.5) (281.9) (266.5) (289.7) (289.7) (300.7) (285.3) (295.3) (312.8) (324.5) (336.6)
- Capex (308.6) (408.3) (442.9) (341.7) (443.7) (345.3) (343.4) (345.8) (345.6) (346.1) (346.3) (347.0) (360.0) (373.4) (387.4)
- Working Capital (0.3) (1.6) (1.6) (1.3) (3.3) (2.3) 0.4 (2.1) (0.7) (1.3) (0.7) (1.4) 0.0 0.0 0.0
- Lease Payments (49.1) (50.9) (50.9) (50.9) (59.0) (59.0) (59.0) (61.0) (61.0) (64.3) (65.0) (65.0) (65.0) (65.0) (65.0)
Free Cash Flow (FCF) 368.3 308.5 361.1 530.2 554.8 767.2 743.1 823.4 842.6 888.6 917.4 966.4 999.9 1,039.8 1,081.1
Discounted CF 368.3 288.3 315.3 432.7 423.2 546.9 495.0 512.6 490.2 483.2 466.2 458.9 443.8 431.2 419.0
TEU/hectare (‘000) 46.9 35.9 38.7 41.3 34.9 38.6 39.4 41.1 41.9 43.7 44.4 46.3 46.7 47.1 47.6
TEU/crane (‘000) 171.3 159.4 160.4 163.0 160.1 160.1 157.0 158.0 153.2 152.6 143.7 142.2 143.5 144.8 146.1
Source: UOB Kay Hian

FIGURE 2: STAGE 2 DCF

(RMm) 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044
EBITDA 1,890.7 1,966.3 1,988.0 2,009.8 2,090.2 2,113.2 2,136.5 2,160.0 2,183.7 2,207.7 2,232.0 2,256.6 2,281.4 2,306.5 2,331.9
- Tax Shield (340.3) (353.9) (357.8) (361.8) (376.2) (380.4) (384.6) (388.8) (393.1) (397.4) (401.8) (406.2) (410.7) (415.2) (419.7)
- Capex (110.0) (111.7) (113.3) (115.0) (116.7) (118.5) (120.3) (122.1) (123.9) (125.8) (127.7) (129.6) (131.5) (133.5) (135.5)
- Working Capital 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Lease Payments (70.0) (70.0) (70.0) (70.0) (70.0) (75.0) (75.0) (75.0) (75.0) (75.0) (80.0) (80.0) (80.0) (80.0) (80.0)
Free Cash Flow 1,370.4 1,430.7 1,446.8 1,463.0 1,527.2 1,539.3 1,556.6 1,574.1 1,591.7 1,609.6 1,622.6 1,640.8 1,659.2 1,677.8 1,696.6
Discounted CF 496.4 484.3 457.7 432.5 422.0 397.5 375.6 355.0 335.4 317.0 298.6 282.2 266.7 252.1 238.2
TEU/hectare (‘000) 48.0 48.4 48.8 49.3 49.7 50.2 50.6 51.1 51.5 52.0 52.5 52.9 53.4 53.9 54.4
TEU/crane (‘000) 147.4 148.7 150.1 151.4 152.8 154.1 155.5 156.9 158.3 159.8 161.2 162.7 164.1 165.6 167.1
(RMm) 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054
EBITDA 2,357.5 2,451.8 2,478.8 2,506.1 2,606.3 2,635.0 2,664.0 2,693.3 2,722.9 2,752.8
- Tax Shield (424.4) (441.3) (446.2) (451.1) (469.1) (474.3) (479.5) (484.8) (490.1) (495.5)
- Capex (137.5) (139.6) (141.7) (143.8) (146.0) (148.2) (150.4) (152.6) (154.9) (157.2)
- Working Capital 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Lease Payments (85.0) (85.0) (85.0) (85.0) (85.0) (90.0) (90.0) (90.0) (90.0) (90.0)
Free Cash Flow 1,710.6 1,785.9 1,805.9 1,826.2 1,906.2 1,922.5 1,944.1 1,965.8 1,987.8 1,507.6
Discounted CF 224.4 219.0 206.9 195.6 190.8 179.8 169.9 160.6 151.7 107.5
TEU/hectare (‘000) 54.9 55.4 55.9 56.4 56.9 57.4 57.9 58.4 59.0 59.5
TEU/crane (‘000) 168.6 170.1 171.6 173.2 174.7 176.3 177.9 179.5 181.1 182.7
FIGURE 3: DCF ASSUMPTIONS

Stage 1 (2015-2029) Stage 2 (2030-2054)
Implied EBITDA CAGR (with tariff hike) 8.0% 4.0%
Implied EBITDA CAGR (without tariff hike) 5.2% 1.1%
Maintenance Capex (RMm) 110 110
Implied Max Capacity on TEU/hectare 47,550 59,488
Implied Max Capacity on TEU/crane 146,074 182,748
Risk Free Rate 4.5%
Market Premium 10.3%
Beta (x) 0.70
Debt/Asset Ratio 30%
Tax Rate 25%
Cost of Equity 8.6%
Cost of Debt 4.5%
WACC 7.0%
DCF - Stage 1 (RMm) 6,206.6
DCF - Stage 2 (RMm) 7,217.5
Enterprise Value (RMm) 13,424.1
- Net Debt, FY16 (RMm) (970.7)
Share Base (m) 3,410.0
Target Price (applying a 10% discount) (RM) 3.30

Peer valuation. Although multiple-based valuations are less preferred as it may not account
for differences in capex, concession lengths and revenue sources, we have compared
Westports against its peer group (major container terminal operators worldwide with similar
business model) in two categories. Against Malaysian ports, Westports deserves the
premium on equity value given its superior ROEs. Against international peers however, we
believe the valuation gap in terms of PE (27% premium), P/B (280% premium), and
EV/EBITDA (36% premium) may narrow closer to our target price despite having superior
ROEs (211% premium). The peer valuation supports our view that shares of Westports are
overvalued, based on our assessment on its future outlook.
FIGURE 4: CONTAINER TERMINALS AND PORTS – PEER COMPARISON

Mkt Cap PE (x) P/B (x) EV/EBITDA (x) ROE (%) Dividend Yield (%)
Ticker (US$m) 2014 2015F 2016F 2014 2015F 2016F 2014 2015F 2016F 2014 2015F 2016F 2014 2015F 2016F
Malaysia Ports
Bintulu Port BPH MK 746.3 25.5 24.8 22.4 2.8 2.8 2.8 10.5 11.1 10.5 13.1 21.1 21.4 3.2 3.3 3.5
Northport NCB MK 483.3 52.7 60.0 41.9 1.4 1.4 1.4 13.1 11.1 9.9 2.0 2.8 4.2 n.a. 1.3 1.5
Westports WPRTS MK 3,092.8 30.4 26.7 25.4 7.6 7.1 6.6 17.7 15.6 14.8 26.2 27.4 27.0 2.9 2.8 2.9
Global Ports
China Merchants Holdings 144 HK 8,650.6 15.5 14.5 13.4 0.9 1.1 1.0 20.4 17.0 16.8 7.8 7.6 8.0 3.0 3.1 3.4
COSCO Pacific 1199 HK 3,838.1 n.a. 12.2 11.3 0.8 0.8 0.7 n.a. 9.9 9.2 6.3 6.4 6.7 n.a. 3.3 3.6
Dalian Port 2880 HK 4,103.9 23.6 31.1 33.3 0.9 1.0 0.9 n.a. n.a. n.a. 3.8 3.0 2.9 1.4 1.1 1.2
DP World DPW DU 16,102.0 22.8 19.7 16.3 1.9 1.8 1.6 13.7 11.9 10.4 8.2 9.4 10.5 n.a. 1.5 1.8
Eurokai EUK3 GR 420.7 15.0 12.0 10.3 1.2 1.2 1.1 9.5 9.5 8.7 9.5 11.5 12.1 5.2 5.0 5.1
Hutchinson Port Holdings Trust HCTPF US 4,878.2 n.a. 23.2 22.4 n.a. 0.9 0.9 n.a. 12.0 11.6 (31.4) 3.6 3.9 n.a. 7.9 8.1
Kamigumi 9364 JP 2,339.7 n.a. 17.4 16.6 n.a. 0.9 0.9 n.a. 7.2 7.2 n.a. 5.1 5.4 n.a. n.a. 1.2
Rizhao Port 600017 CH 4,016.1 69.5 47.7 42.8 2.5 2.5 2.4 n.a. n.a. n.a. 5.9 3.9 4.9 n.a. 0.2 0.4
Santos Brasil STBP11 BZ 532.9 69.5 43.9 30.4 1.4 1.4 1.4 10.1 8.7 7.6 6.4 3.4 5.1 n.a. 1.9 1.9
Shanghai Int'l Port Group 600018 CH 26,229.8 24.9 24.3 22.0 2.9 2.9 2.7 n.a. 15.4 14.4 13.0 11.6 11.6 n.a. 2.1 2.2
Shenzhen Chiwan Wharf 200022 CH 1,846.0 17.6 n.a. n.a. 1.9 n.a. n.a. n.a. n.a. n.a. 10.4 n.a. n.a. n.a. n.a. n.a.
Tianjin Port DEV 3382 HK 977.3 8.2 8.8 8.8 0.6 0.6 0.6 7.4 n.a. n.a. 7.0 7.4 7.3 4.3 4.6 4.6
Wilson Sons WSON33 BZ 622.0 24.6 26.1 11.2 1.5 n.a. n.a. 5.2 4.8 4.2 5.6 7.6 n.a. n.a. 3.8 5.4
Xiamen International 3378 HK 717.6 13.3 13.0 14.1 1.0 0.9 0.9 10.9 7.8 8.7 9.2 7.3 6.6 3.6 3.0 3.0
Weighted Average Malaysia 31.9 29.7 26.6 6.3 5.9 5.5 16.1 14.5 13.6 21.8 24.0 23.9 2.7 2.7 2.9
Westports Premium/Discount (%) (4.6) (10.1) (4.4) 21.4 20.7 19.9 9.7 7.9 8.4 20.2 14.2 13.0 8.9 2.8 1.5
Weighted Average Global 20.5 22.1 19.9 1.8 1.8 1.7 5.6 11.6 10.8 8.6 8.3 8.7 0.5 2.3 2.5
Westports Premium/Discount (%) 48.1 21.0 27.3 314.8 286.3 279.9 214.3 34.3 36.4 204.8 228.4 211.6 438 21.7 14.6
Source: Bloomberg, UOB Kay Hian

Scenario analysis to DCF. Westports is already well-covered by analysts; however the

uncertainties in global growth, shipping consolidation and regional ports’ competitiveness
could affect its full DCF valuation up till 2054 (assuming no inorganic M&A). Therefore we
have done up various scenario analyses based on the below assumptions:-
a) WACC assumptions. Increasing interest rate expectations (ie US Fed rate hike), and
global/market cycles could impact WACC expectations.
FIGURE 5: DCF SCENARIO ANALYSIS FROM WACC ASSUMPTIONS

Base Case Bull Case Bear Case
Beta (x) 0.70 0.55 0.80
Risk Free Rate (%) 4.5 4.0 5.0
Cost of Equity (%) 8.9 7.0 10.0
WACC (%) 7.0 5.8 8.1
Target Price (RM) 3.30 4.42 3.00
b) Container growth assumptions. Our base-case assumption is that capacity may not
reach the optimum 16m TEUs by as early as 2020, due to moderation in growth. The
bull-case assumption assumes the government’s target of 8% in its 11th Malaysia
Masterplan for the logistics sector. The bear-case assumption could imply a lack of trade
recovery beyond 2016, or loss in market share to other ports.
FIGURE 6: DCF SCENARIO ANALYSIS FROM CONTAINER VOLUME GROWTH ASSUMPTIONS

Container Throughput by end 2020 (m TEUs) 11.9 13.3 10.8
Container Throughput 2014-2020 CAGR (%) 6.0 8.4 4.3
Implied Terminal Utilization (%) 78-79 84-85 71-72
Terminal Capacity by 2020 (m TEUs) 15.0 16.0 14.5
c) Container tariff assumptions. Our base case assumes the two phases of tariff hike will
benefit Westports’ net container yield (excluding rebates) at 5-6% CAGR up till 2020. The
bull case implies the ability to capture smaller rebates and faster upward renewal of
transhipment contracts closer to the maximum published tariff. The bear case implies the
port is unable to have strong bargaining power against its key customers on agreed rates,
as shipping liners are seeking opportunities to save costs and ports get more competitive.
FIGURE 7: DCF SCENARIO ANALYSIS FROM CONTAINER TARIFF ASSUMPTIONS

Blended Net Container Yield/TEU by 2020 (RM) 283.8 323.5 260.1
Implied Net Container Yield CAGR 2015-2020 (%) 5-6 8-9 3
Quantum Increase of Next Tariff Hike beyond 2030 (%) 15 25 8
d) Other operating cost assumptions. Our base case assumes long-term oil price of
US$75/bbl (below OPEC’s view of US$80/bbl by 2020) and the existing 4% annual hike
in manpower costs. The bull case implies that the port is able to cut costs further (ie more
paperless processes and less operational bottlenecks) and oil prices do not recover
beyond US$55/bbl in the long term. The bear case assumes oil price surge to
US$100/bbl by 2020, and high manpower costs.
FIGURE 8: DCF SCENARIO ANALYSIS FROM COST ASSUMPTIONS

Manpower, Electricity Inflationary CAGR (%) +4 +2 +7
Brent Price Assumption by 2020 (US$/bbl) 75 55 100
Implied EBITDA Margin by 2020 (%) 54.0 57.8 51.5

Financials
Earnings trajectory to slow down in 2016, then resume growth by 2017. We are
expecting 2016F core PAT growth (excluding tax allowance) at 5% before returning to >10%
growth thereafter. The near-term earnings weakness is due to slower throughput growth and
tepid demand to offset effects of tariff hike and capacity expansion, and the effects of cost
savings will not likely recur in 2016. In our earnings outlook section, we are highlighting the
apparent slowdown in the higher yielding gateway container business (due to weakening
Malaysia economy), which may offset net container yields arising from the expected boost in
tariff hike. Note that management has not yet issue guidance for 2016 outlook.
Margins to remain strong. Despite slower volume growth outlook, in particular a slowdown
in the higher-yielding gateway business, we foresee PAT margins to remain strong at 30%.
This is mainly due to the impact from cost savings that is significant in 2015 on the back of
cheaper fuel cost in tandem with lower oil prices, coupled with stable container yield growth.
FIGURE 9: REVENUE AND PAT FORECASTS

2013 2014 2015F 2016F 2017F 2018F
Operating Revenue (RMm) 1,712.6 1,562.1 1,589.8 1,750.7 1,911.1 2,044.9
Core PATMI, Exclude ITA (RMm) 405.6 441.1 501.1 527.0 591.9 637.3
Core PATMI Margin (%) 23.6 28.2 31.5 30.0 30.9 31.2
Core PATMI Growth (%) 24.6 8.8 13.6 5.2 12.3 7.7
ROE (%) 26.2 26.2 27.4 27.0 28.3 28.3
Balance sheet strength. Due to high cash flow generation and >10x interest cover, we
expect Westports’ net gearing to remain at a reasonable range of 0.5x (a slight increase from
0.4x in 2014) as it carries out the expansion of CT8 and CT9. CT8 is expected to be the main
bulk of its RM1b capex plans for 2015-17. One of the group’s largest borrowing lines is a
RM2b sukuk musharakah medium term note (MTN) available for 20 years from 2011. It had
drawn down about RM1.2b by end-14, at an interest cost of about 4-5% p.a.. The covenant
for this loan entails the financial service cover ratio to be >1.25x, and finance to equity ratio
to be <2x. The company’s comfortable net gearing level is <1x.
FIGURE 10: NET GEARING FORECASTS FIGURE 11: CAPEX BY COMPONENTS
(x )
0.8
Gross Debt-to-equity
0.7
0.7
0.7
0.7
0.6
Net Debt-to-equity
0.6
0.5
0.5
0.5
0.5
0.4
0.4
0.3
0.2
0.1
0.0
10 11 12 13 14 15 16 17 18
Source: Westports, UOB Kay Hian Source: Westports 3Q15 Investor Presentation, UOB Kay Hian
Seasonality. Historically, 3Q and 4Q are strong in terms of container throughput growth,

due to increased business activity in anticipation of the demand towards year-end
Christmas season, and more operating days in the 4Q. According to its prospectus,
throughput also grew strongly during the Chinese New Year and Ramadan festive seasons.

Earnings Outlook
We forecast FY15-17 core earnings at RM501m/RM527m/RM592m. This implies core
earnings growth of 13.6%/5.2%/12.3% respectively. Note that our core forecast excludes tax
allowance, and is below consensus by 4-13%.
FIGURE 12: CONTAINER REVENUE PROJECTIONS

(RMm) 2013 2014 2015F 2016F 2017F 2018F
Container Revenue 1,105.1 1,251.0 1,332.9 1,483.1 1,632.7 1,757.3
Transshipment 542.6 611.7 666.0 780.7 807.3 866.1
Gateway 429.8 480.6 497.8 514.3 618.3 668.3
Value Added Services 132.6 158.7 169.1 188.2 207.1 222.9
Percentage to Total Operating Revenue (%) 82.0 80.1 83.7 84.7 85.4 85.9
Source: Westports, UOB Kay Hian
We expect moderation in throughput growth in FY16. Our assumptions are: a) weakness

in gateway container growth, b) slight growth in transshipment volume, and c) slower
container capacity expansion on a higher base yoy. For conventional throughput, we assume
a conservative 2% annual growth, given the volatility of commodity demand, but this is small
at <10% contribution to group revenue. Ahead, we expect strong recovery from 2017
onwards in both gateway (full rebound of Malaysia economy) and transhipment (global
adjustment to economy growth).
a) Westports is already experiencing a 5% contraction in gateway throughput in 3Q15. We
expect this to extend through 2016 as a slowdown in imports may outweigh prospects for
exports. This is an effect of a tightening domestic economy (especially in relation to the
port’s hinterland – Klang Valley and the surrounding states), and Malaysians having the
most pessimistic consumer confidence in Southeast Asia.
FIGURE 13: CONTAINER (GATEWAY) MAY SEE FURTHER WEAKNESS

b) We project transshipment throughput to grow at a slower pace in 2016, due to

weaknesses in global economy. The Intra-Asia route saw a contraction of 5% in
throughput in 3Q15 (Intra Asia is 48% of total container throughput for Westports).
According to channel checks, SOM container volume saw contraction trend worsen to
>10% up till 10M15. The effect of past market share gains from other SOM ports are also
likely to wane off.
FIGURE 14: WESTPORTS’ CONTAINER (TRANSHIPMENT) TRADE LINES
c) While CT8 should progressively add container handling capacity by 2017, we do not see
terminal utilisation surging above the port’s sustainable level of 70-80%. Our capacity
growth forecast is also more conservative vs management’s expectation of 13.5m by
2018 (when CT8 is fully operational), and we expect 12 quay cranes to be operational by
2018 vs a total of 14 cranes targeted to be delivered (eight cranes for CT8 while six
cranes are for CT1-CT7).
FIGURE 15: CONTAINER THROUGHPUT PROJECTIONS AND KEY ASSUMPTIONS

2013 2014 2015F 2016F 2017F 2018F
Container Capacity (TEU m) 9.5 11.0 11.0 11.8 12.5 13.0
Capacity Growth (%) 6.1 15.8 0.0 6.8 6.4 4.0
No. of Crane (units) 45 52 52 56 60 64
Container Terminal Utilisation (%) 78.6 76.1 81.0 75.0 77.0 79.0
Implied Utilisation on TEU/hectare 54,248 44,053 46,895 35,463 38,732 41,328
Implied Utilisation on TEU/crane 166,000 160,962 171,346 157,366 160,417 163,016
Container Throughout (TEU m) 7.5 8.4 8.9 8.9 9.6 10.3

- Transhipment (TEU m) 5.3 5.9 6.4 6.5 6.8 7.3
- Gateway (TEU m) 2.2 2.5 2.5 2.4 2.8 3.0
Percentage of Transhipment (%) 70.5 70.6 72.0 73.0 71.0 71.0
Percentage of Gateway (%) 29.5 29.4 28.0 27.0 29.0 29.0
Container Throughout Growth (%) 8.1 12.0 6.5 0.2 7.8 6.7
- Transhipment Growth (%) 6.3 12.1 8.5 1.6 4.8 6.7
- Gateway Growth (%) 12.8 11.8 1.4 (3.4) 15.8 6.7

Planned tariff hike may not as exciting as expected. The Ministry of Transport (MOT)
approved an upward revision of container tariff rates, which was long expected as a key re-
rating catalyst. The first phase (a 15% increase) is effective Nov 15, while the second phase
(a 15% increase) was expected to be effective Sep 18. However, bearing in mind that the
15% is on maximum published tariff rates, we believe the 15% tariff hike will provide only a
moderate effect, at an overall CAGR of 5-6% to the blended net TEU yield (1.54 times of
container yield) in 2015-18. We assume that: a) the net yields (after rebates) for
transshipment depends on contract renewal – rates are locked in contract terms which can
range between 1-5 years’ tenure (average 3-4 years), b) For gateway, the 15% tariff hike on
net yield is immediate, but does not apply to empty container load (empty comprises about
15-20% of total container TEUs). While gross container yields will be boosted by 11%
immediately in 2016, following the tariff hike, we see the net yield hike will only be
progressive within the next three years, taking into account ongoing rebates.
FIGURE 16: TARIFF PROJECTIONS AND ASSUMPTIONS

Based on 1.54 TEU Per Container 2013 2014 2015F 2016F 2017F 2018F
Implied Net Transhipment Yield/TEU, After Rebates (RM) 158.6 159.4 161.0 166.8 174.9 182.9
Premium/(Discount) to Average Published Transhipment Tariff for 20’ & 40’ (%) (9.4) (8.9) (8.0) (17.0) (13.0) (9.0)
Implied Net Gateway Yield/TEU, After Rebates (RM) 300.9 300.9 301.9 319.5 332.5 345.6
Premium/(Discount) to Average Published Gateway Tariff for 20’ & 40’ (%) 4.7 4.7 5.0 (2.0) 2.0 6.0
Implied Gross Blended Yield/TEU, Before Rebates (RM) 227.82 230.17 230.38 255.77 261.24 263.51
Growth of Blended Tariff/TEU (%) 1.3 1.0 0.1 11.0 2.1 0.9
Cost savings from cheaper fuel unlikely to recur. Westports had enjoyed significant fuel
cost savings in 2015, mainly due to a sharp contraction in crude prices. This effect will also
wane off as we are assuming a straight line progression of Brent prices from US$50/bbl in
2015, to US$63/bbl in 2018. The other key opex components are primarily tied to container
growth, while items like electricity and manpower are assumed to grow at an inflation rate of
4%. Our EBITDA margin forecast is also expected to taper slightly to 55% in the financial
years ahead, from the peak of 56% in 2015F.
FIGURE 17: PORT OPERATING COST AND EBITDA PROJECTIONS

(RMm) 2013 2014 2015F 2016F 2017F 2018F
Key Port Operating Costs
Container ( rebates) 202.0 226.0 245.4 311.4 314.7 323.5
Conventional 19.0 22.0 23.8 25.7 27.8 30.1
Marine 31.0 31.0 31.0 31.0 31.0 31.0
Fuel 88.0 94.0 67.2 71.5 79.8 88.7
Electricity 21.0 27.0 27.8 30.6 33.5 35.9
Manpower 149.0 164.0 170.6 189.5 209.6 226.7
Depreciation & Amortisation 101.0 124.0 131.0 142.4 156.3 171.3
Total Port Operating Cost 611.0 688.0 696.8 802.1 852.9 907.2
EBITDA 688.6 789.2 893.3 945.0 1,053.8 1,136.5

EBITDA Margin (%) 51.1 52.5 56.2 54.0 55.1 55.6
EBITDA Cover (x) 14.6 12.3 12.7 12.8 13.2 13.9
Interest Expense 56.8 75.0 81.5 85.1 91.0 95.5
Loans 31.9 51.4 59.2 64.2 71.6 77.8
Concession Liability Cost 24.9 23.7 22.3 20.9 19.4 17.7

Company Background
The largest privately-owned port in Malaysia. Westports is an integrated port with over 20
years of operating history, since it was founded under its previous name Kelang Multi
Terminal Sdn Bhd in 1994 by Y.Bhg. Tan Sri Datuk G. Gnanalingam. Through Tan Sri’s
leadership, Westports’ world ranking in ports container volume advanced from 26th position
th
in 1995 to 12 in 2013, according to Containerisation International Yearbook. His son, Ruben
Emir Gnanalingam, is the current CEO of the group. The Gnanalingam family collectively
owns 45.5% of the port. Hutchison Port is also a major shareholder with 23.6% ownership
via the vehicle South Port. Hutchison’s investment was dated as early as 2000, when it
entered into a strategic partnership that had aided Westport’s expansion into untapped
markets and development into a highly competitive, world-class container terminal.
Long-term concession until 2054. The port is situated on 536ha of waterfront land with
terminal handling facilities for containers, dry bulk, liquid bulk and other conventional cargo.
Being strategically located in the Straits of Malacca (SOM), Westports is the greater of the
two key ports in Port Klang, with the other being Northport (NCB). In 1994, the company
locked in a privatisation agreement with the Port Klang Authority (PKA), and obtained the
right to operate the port facilities for 30 years (until Aug 24). Thereafter, PKA had agreed to
extend the concession by another 30 years to Aug 54.
The best proxy to Port Klang. Westports is regarded as the best proxy to Port Klang, as it
had been the driving force behind Port Klang’s performance, almost doubling its container
throughput market share in Port Klang to 77% currently vs 40% in 2001. Port Klang had
th
consistently been the country’s premier port and is ranked the 13 busiest port globally,
th
ahead of PTP which was placed at 19 . Amongst the 10 local ports tracked by the Ministry of
Transport, Port Klang commands a consistent 48-49% share of cargo traffic since 2002.
Subsequently, Westports is also the market leader amongst the 10 Malaysian ports,
commanding close to 38-39% market share in Malaysia as at 1H15.
FIGURE 18: WESTPORTS OVERALL CONTAINER MARKET SHARE TREND
(%)
90
Market Share, Port Klang 77 76
80 72
Market Share, Malay sia 69
70 67
Market Share, SOM 63 61 63
59 60
60 52
48 50
50 44
36 37 38
40 32 34
29 31 28 31
24 28
30 23 23 23
20 13 14 14 15 16 16
9 10 11 12 11
8 9 9
10
0
02 03 04 05 06 07 08 09 10 11 12 13 14 9M15
Source: Drewry Maritime, Maritime and Port Authority of Singapore (MPA), Ministry of Transport Malaysia (MOT), Westports, UOB Kay Hian

FIGURE 19: WESTPORTS TRANSSHIPMENT MARKET SHARE TREND FIGURE 20: WESTPORTS GATEWAY MARKET SHARE TREND
(%) (%)
100 70
Market Share, Port Klang Market Share, Port Klang
90 Market Share, Malay sia Market Share, Malay sia
60 63
80 83
50
70
68
60 40 36
50
40 30 34
40
20
30 23 22
20 10
04
05
06
07
08
09
10
11
12
13
14
1Q15
6M15
9M15
04
05
06
07
08
09
10
11
12
13
14
1Q15
6M15
9M15
Source: Maritime and Port Authority of Singapore (MPA), MOT, Westports, UOB Kay Hian Source: MPA. MOT, Westports, UOB Kay Hian
FIGURE 21: WESTPORTS POSITION VS MALAYSIA PORTS CONTAINER TRAFFIC GROWTH
(TEU m)
25
22
21 21
20
20
18 18
16 16
15
15 13
12
11
10
10 9
8
7 7
6 7
5
5 6
4 4
4
2 3 3
2
0
02 03 04 05 06 07 08 09 10 11 12 13 14 9M15
Port Klang PTP Penang Johor Kuantan Bintulu
Kuching Miri Rajang Sabah Westports Total Malay sia
Source: Ministry of Transport Malaysia (MOT), Westports, UOB Kay Hian
Superior EBITDA margins and efficiency vs peers. Westports’ EBITDA margins of 48-
52% are at the top-end of local container terminals between 20-50% (i.e. NCB, Suria Capital,
Bintulu Port, PTP). Efficiency and favourable infrastructure (situated near KLIA and
Expressway) helps support high margins, boasting world-class productivity of an average of
35 crane moves per hour (mph) vs a standard of 25 mph, and the deepest draft at 17.5m that
is able to accommodate the world’s largest vessels up to >19k TEUs. As vessels have a
higher preference for ports with deeper berths, Westports has been operating at high
terminal utilisation between 76-80% since 2010.

Key competitive features of the port. a) It is located approximately 12 nautical miles from
the SOM main shipping lane (sailing time of just an hour to its stations), b) it has deepwater
capacity with 27 berths, 20 of which are contiguously connected in a straight line extending
to 5km to allow higher utilisation in berthing vessels, c) maximum water depth at 18m
provides Westports deepwater ability to support the world’s largest container vessels at
>19,100 TEUs, which would otherwise require substantial costs for dredging, d) high
productivity track record, with the ability to perform standard container moves productivity at
35 mph that exceeds the industry’s 25 container mph, and e) easy accessibility to 405ha of
the industrial Port Klang Free Zone.
FIGURE 22: PRODUCTIVITY SNAPSHOTS

Year 1996 2014
Deepest Draft 15.0m 17.5m
Container Berths 600m 4.6km
Quay Cranes 9 units 52 units
Crane Productivity 20 mph (during year 2000) 35 mph per crane for larger vessels (size >300m)
Handling Capacity 1.0m TEUs 11.0m TEUs
No. of Vessels Called 4,346 (during year 2004) 8,656
FIGURE 23: CONTAINER VESSEL SIZE
Source: Westports, UOB Kay Hianx

FIGURE 24: LOCATION OF WESTPORTS RELATIVE TO STRAITS OF MALACCA
Sources of revenue. Container cargo services is the core business and largest contributor
at >80% of group revenue, followed by conventional cargo and marine/rental services.
a) Container: Transshipment (refers to the transfer of containers from one vessel to
another at the terminal en route to a final destination), is the bulk of its terminal handling
services. Gateway, or import/export (refers to containers originating from and destined to
the ports’ hinterland or the point of consumption and production) is less price-sensitive
and the higher yield segment of its container business. These are complemented by
value added services (i.e. storage, reefer, container freight etc).
b) Conventional: Conventional services comprise dry bulk (coal, fertilisers and food-based
commodities etc), liquid bulk (petrochemical, palm oil, fuel oil etc), break bulk (iron, steel,
wood products etc), RORO (automobiles etc) services and cement services. This
contributes <10% of the groups revenue historically.
c) Marine/rental: Westports has tug boat and pilotage services, to help guide vessels into
the channel leading to the port. This is essentially a complementary offering available to
shipping customers to save time and costs in booking, berthing and sailing. Rental
services would entail storage and office space lease, usually for larger conventional
cargo customers.

FIGURE 25: SUMMARY OF REVENUE SOURCES
Tariff. Tariffs are charged for the loading and unloading of containers, storage and other
services. The maximum tariffs, depending on the type of service and containers handled, are
published and regulated by PKA. The Ministry of Transport has approved the revision of
container tariff rates upwards in two phases: Phase 1 was effective Nov 15 (delayed from
Sep 15) for 15% increase, while Phase 2 is expected to be effective Sep 18 for 15% increase.
The last tariff increase was about 15 years ago. The expected increase would be 30%;
however we note that not all tariff items are subject to this increase (ie empty container,
some storage rates and movements charges have smaller increments or retained).

FIGURE 26: SOME TERMINAL HANDLING TARIFF TO INCREASE BY 15% IN EACH PHASE
(RM) 2012-2015 Phase 1 (eff Nov 2015) Phase 2 (eff Sept 2018)
Transshipment (FCL) 20' 140.0 161.0 182.0
Transshipment (FCL) 40' 210.0 241.0 273.0
Transshipment (empty) 20' 140.0 160.0 180.0
Transshipment (empty) 40' 210.0 240.0 270.0
Gateway (FCL) 20' 230.0 265.0 300.0
Gateway (FCL) 40' 345.0 400.0 450.0
Gateway (empty) 20' 230.0 240.0 250.0
Gateway (empty) 40' 345.0 360.0 375.0
Restow 20’ 220.0 253.0 286.0
Restow 40’ 335.0 385.0 435.0
FIGURE 27: WESTPORTS TERMINAL HANDLING TARIFF (NOV 2015) FIGURE 28: WESTPORTS TERMINAL HANDLING TARIFF (OCT 2012)
Source: Westports Tariff Booklet (1 Nov 2015), UOB Kay Hian Source: Westports Tariff Booklet (Oct 2012), UOB Kay Hian
Expansion and capex plans. We understand the capacity expansion is mainly to support
expected demand increases from its existing shipping customers, in particular from the
Ocean 3 (O3 Alliance) formed between CMA CGM, China Shipping Container Line (CSCL)
and United Arab Shipping Co (UASC). Westports is carrying out the following expansions:-
a) CT8 will be progressively ready in two phases by mid-16/mid-17 respectively. It involved
constructing a 600m wharf with 14-ship-to-shore cranes, plus back-of-terminal facilities
including a second container gate, marshalling centre and container freight station. It will
also have an extensive yard with rubber-tyred gantry cranes, terminal tractors and trailers.
The estimated capex for 2015-17 (primarily for CT8 expansion) is RM1.1b. Development
in 2015 was budgeted at RM400m.
b) We expect the CT9 expansion to commence in 2018-20 and to have a similar size and
capacity with CT8. Both CT8 and CT9 will contribute an additional combined 3m TEUs of
annual capacity, according to Westports’ FY13 investor presentation.
c) Westports is also bringing in additional cranes that will boost the capacity of the existing
CT1-CT7 by another 2m. The maximum capacity from all three expansion plans will
result in 16m TEUs annually by 2020 at the earliest, depending on market conditions.

FIGURE 29: CAPACITY EXPANSION AND THROUGHPUT FORECAST
(TEU m) (%)
18 100
Container Throughput (LHS) 90
16
Container Capacity (LHS)
14 Terminal Utilisation (RHS) 80
12 70
60
10
50
8
40
6 30
4 20
2 10
0 0
97 99 02 03 05 07 09 11 13 15 17 19 21
FIGURE 30: PORT LAYOUT (FUTURE DEVELOPMENT IN YELLOW – CT8/CT9)

Key Customers
Shipping Alliance – Cluster/Concentration risk. The O3 Alliance, which was formed
between three large shipping carriers (CAM CGM, CSCL, and UASC) as part of an ongoing
industry consolidation, is the single largest customer (cluster) concentration to Westports.
These three carriers are already existing, top customers of Westports. We believe the
alliance’s development was a key driver to Westports’ container growth, as all three carriers
have ultra-large container vessels on order that will allow them to maximise economies of
scale on their combined services. The remaining 45% of Westports’ container volume comes
from the other 30 main shipping lines.
FIGURE 31: KEY CUSTOMERS

Key Customers & Throughput Contribution Key Features/Outlook
Ocean Three/ CMA CGM, China Shipping Container Lines and United Arab Shipping Co, had formed the “O3 Alliance” officially in Jan
“O3” Alliance 2015. O3 competes directly with the 2M, G6 and CKYHE alliances. O3 is estimated to control 13.9% of the market share
(~55% of throughput) of the Top 20 carriers, according to Alphaliner.
The agreements touched upon the following maritime trades: Asia-Europe, Asia-Mediterranean, Transpacific and Asia-
America. The new alliance’s strongest presence is expected to be in the Europe-Asia trade, where it is estimated to have
a 20% market share, ahead of 13% and 6% shares in the trans-Pacific and trans-Atlantic, respectively. This contrasts
with the 2M’s estimated 35% share of the Asia-Europe trade, 15% in the trans-Pacific and a dominant 40% across the
Atlantic.
CMA CGM CMA CGM is the world’s 3rd largest carrier behind Maersk and MSC, with 470 vessels, serving 400 of the world's 521
(~36% of throughput) commercial ports. It had 1.6m TEUs of fleet capacity and 8.6% share of global deployed capacity, according to
Alphaliner.
It outperformed the industry average with 9.7m TEUs carried during 9M15, up 6.5% on the first nine months of 2014.
In 3Q15, the group took delivery of two 18,000-TEU vessels, CMA CGM Bougainville and CMA CGM Zheng He, bringing
its 18,000-TEU fleet to five. A sixth such vessel will join the fleet in the fourth quarter.
China Shipping (CSCL) China Shipping Container Lines Co., Ltd. (CSCL), affiliated to China Shipping Group, is the 7th largest global container
(~6-8% of throughput) shipping liner by capacity. 87 out of the 156 ships are above 4,000 TEU, totalling 620,000 TEU. It had 3.7% share of
global deployed capacity, according to Alphaliner.
In 1H15, the company took delivery of five 19,100 TEU new vessels. By 1H15 its operating capacity was boosted to
909,000 TEU as part of its fleet optimisation plans.
United Arab Shipping Company (UASC) UASC is a global shipping company based in the Middle East. It is the 19th largest global container shipping liner with
(~10-12% of throughput) capacity of 294,000 TEUs and 1.8% market share.
UASC is currently implementing one of the industry’s largest and most technologically advanced new building
programmes, with 17 new vessels on order; six 18,800 TEU and 11 15,000 TEU containerships.
Further consolidation. At the time of writing, CMA CGM is buying over NOL from Temasek,
and CSCL is consolidating its business with COSCO Shipping. All in, we see more downside
risk to Westports, as we think any upside is capped by Westports’ peak utilisation and slower
future capacity growth. The downside risk is that major shipping lines are pushing for multiple
hub strategies. By acquiring NOL, CMA CGM had committed to “increase container volume
with PSA and shift some volumes away from other hubs, as it makes sense to establish a
strong base in Singapore”. CSCL’s plans to “exit the container box business (shift from liners
to leasing) by consolidating the business to COSCO”, is also an uncertainty to the O3
Alliance’s future demands. The timeline will likely take 1-2 years, as the existing shipping
alliance agreements and terms will stay with a one-year notice of withdrawal, if any.

Industry
Key ports in Straits of Malacca (SOM). SOM is the world’s second busiest waterway, as it
is the strategic path for many shipping routes between the East and West (Asia-Europe,
Asia-Africa, Asia-Australia, Intra-Asia etc). Ports located in Malaysia, Singapore, Indonesia
and Thailand benefit from activities in the SOM. According to Westport’s prospectus, there
are four leading container ports in SOM, namely PSA (Singapore), PTP (Johor, Malaysia,
Port Klang (Westports and NCB, Malaysia) and Tanjung Priok (Indonesia). The former three
ports are the larger ports, given their close proximity to major trade lines.
The future role of Port Klang. The combined expansion of NCB and Westports will enable
Port Klang to handle 20m TEUs by 2016. Port Klang Authority (PKA) is aiming for an overall
capacity of 30m TEUs in the next 10 years. The port complex is strategically located near the
busy SOM and bordered by a commercial and industrial hub close to transportation
infrastructure (KLIA terminals, Expressway) and KL/Klang Valley’s 6m inhabitants.
SOM container outlook pegged to economic growth. The container throughput in SOM
collectively grew at a CAGR of 7% in 2002-14, in line with the world container growth and the
boom of the Asian economies. However, Westports revealed in its 3Q15 briefing that SOM
container growth had been flattish so far in 2015, attributable to weaknesses in the global
economy and a slowdown in China’s growth. Industry data reveals that container volume in
Singapore had been contracting since 4Q14, while container throughput from both PTP and
Port Klang are holding up but at a moderate pace of growth. By Sep 15, container volume for
both Malaysia and Singapore combined had a contraction of >5%. A prolonged slowdown in
the region’s trade lines may impact Westport’s transshipment business adversely.

FIGURE 33: MONTHLY CONTAINER THROUGHPUT FOR PORTS IN

FIGURE 32: QUARTERLY CONTAINER GROWTH (PSA, PTP, PORT KLANG) PENINSULAR MALAYSIA AND SINGAPORE
(TEU m)
10
PSA Port Klang PTP Westports
8
4
2 2 2 2 2 2
2
2
0
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
Source: MPA, MOT, Westports, UOB Kay Hian Source: Drewry Maritime Equity Insight on Ports, UOB Kay Hian
FIGURE 34: SOM CONTAINER TRAFFIC GROWTH, INCLUDING INDONESIA FIGURE 35: ANNUAL CONTAINER TRAFFIC GROWTH OF PSA, PTP AND
AND THAILAND PORT KLANG UP TILL 9M15
(TEU m) (%) (TEU m)

100 35 60
Singapo re (LHS) M alaysia (LHS) P SA (LHS) P o rt Klang (LHS)
Indo nesia (LHS) Thailand (LHS) P TP (LHS) Westpo rts (RHS)
80 Thro ughput Gro wth (RHS) 25 50
20 13 40
14 12
60 10 15
7 8
30
5 3 4
40 9 8 5
20
20 -5 6 7 7 8 7
10 5 4 6
2 3 3 4 4
-9 2
0 -15 0
02 04 06 08 10 12 14 02 04 06 08 10 12 14 9M15
Source: Drewry Maritime, MPA, MOT, Westports, UOB Kay Hian Source: MPA, MOT, Westports, UOB Kay Hian

Malaysia Regulatory: The Logistics And Trade Facilitation Masterplan

Part of the 11th Malaysia Plan (2016-20). The Logistics and Trade Facilitation Masterplan
provides the strategic framework to resolve bottlenecks in the logistics and trades sector and
elevate Malaysia to become a regional player in the medium term. According to the
Economic Planning Unit, the key targets are to: a) boost contribution of the transport and
storage subsector to the GDP from 3.6% in 2013 to 4.3% by 2020, an estimated increase of
RM22.2b, b) boost cargo volume CAGR from 5.5% to 8% to reach 880m tonnes in 2020, and
c) generate 146,000 new jobs by 2020. The Ministry of Transport will head the National
Logistics Taskforce, which is established to ensure the implementation of the Masterplan.
FIGURE 36: MALAYSIA’S POTENTIAL LOGISTICS OUTPUT
Source: Malaysia Economic Planning Unit, UOB Kay Hian
Five strategic shifts. The Masterplan sets out five strategic shifts: a) strengthen the
institutional structure and streamline regulations, b) enhance trade facilitation mechanism, c)
consolidate cargo volume through a well-defined ‘hub and spoke’ system provide better
connectivity to entry points, optimise usage of existing infrastructure and promote modal shift
from road to rail, d) strengthen technology & human capital, and e) internationalise logistics
services, to enable logistics service providers to be globally competitive.
Three key phases. The Masterplan will have 21 action items, divided into three phases. The
first phase is to address bottlenecks in the sector (2015-16). The second phase will enhance
domestic growth, connectivity and integration of services (2016-19). The final phase is to
generate a regional footprint with frontier logistic services (2020 and beyond).

FIGURE 37: SUMMARY OF LOGISTICS AND TRADE FACILITATION MASTERPLAN
Source: Malaysia Economic Planning Unit, UOB Kay Hian
Impact to Port Klang and Westports. According to EPU, Phase 1 will involve improving
last-mile connectivity to Port Klang, which includes upgrade of critical roads, rail link between
Westports and NCB, and traffic management system. Phase 2 will entail positioning Port
Klang as a regional maritime centre, as part of the integrated hub and spoke model.
May benefit from synergies with other global trade developments. The Masterplan, in
our view, could see synergies with ongoing developments such as the Trans-Pacific
Partnership (TPP) agreement that will liberalise cross-border trade restrictions and potentially
boost imports/exports on a longer term. At the same time, China and Indonesia have
ambitions to enhance the maritime trade routes (China’s Silk Maritime project and
Indonesia’s massive port developments).
At best a longer-term catalyst. According to our channel checks and discussion with
management, it seems that the Masterplan is still at its infancy, as the status of the
development phase (Phase 2) of the action plans are not widely known yet by industry
players. Pending further details from industry players, we view this as merely a longer-term
catalyst (ie no financial impact within the 2016 horizon) for now. Nevertheless, the action
plans laid out seem to be a major catalyst for Westports’ gateway container business, as
they are set to address efficiencies to cater to the growth of hinterland cargo volume (ie for
domestic consumption/production).

Risk Factors
Uncertainties that could affect our valuations. The following are risk factors which may
be opportunities for Westports, or long-term threats:-
Privatisation of local ports could post greater competition. One uncertainty in relation to
this is Westports’ closest competitor, NCB. MMC’s plans to privatise NCB may be a sign of
the group’s plans to rejuvenate the port and boost its competitiveness. At the same time,
MMC may seem to have long-term plans to consolidate its port assets across the whole
SOM (ie NCB, PTP, Johor Port, and Penang Port). NCB had been losing market share to
Westports in the past, due to its inability to provide deeper berths (can only receive vessels
up to 14,000 TEUs) and lower efficiencies. However, NCB recently recorded a 14% yoy
growth of container handled outperforming Westports’ 6% in 3Q15 (its 9M15 container
throughput grew 10%, vs Westports’ 9% yoy). NCB is expanding with the reopening of Wharf
8 that is set to be operational by 2017, and will be able to accommodate vessels as large as
18,000 TEU. Total annual capacity may be boosted by 0.3m to close to 6m TEUs.
PKA plans for a potential third port? According to IHS, PKA has a target to boost TEU
capacity to 30m in the next 10 years, from about 20m based on combined capacities of NCB
and Westports. The government and PKA are still looking for a suitable location to expand its
capacity. In any case, both NCB and Westports would be given the first right of refusal to
develop a potential new terminal. The most probable location for what is slated to be the new
container hub of Port Klang is likely to be private lands located in Pulau Indah, as the
mainland area adjacent to NCB is already quite saturated. This is a wildcard as it could
present an opportunity for Westports in terms of inorganic growth. Our last update with
management is that there is no signal from PKA yet of such a development.
Regional ports have greater capacity expansion:-
a) PTP: PTP, which has a concession until 2055, has MMC as a similar shareholder with
NCB, and one of the key ports to leverage on the development of the Iskandar region in
Johor. PTP has the greatest room for long-term capacity expansion amongst the
Malaysian ports. Last year, the port saw capacity boosted by 25% to 10.5m TEUs, having
completed two new berths and adding the ports’ total quay length to >5km. It plans to
increase container handling capacity by another 25% to 12.5m TEUs in 3-5 years’ time.
FIGURE 38: PTP EXPANSION PLANS
Source: PTP, UOB Kay Hian

b) PSA: The expansion of Pasir Panjang Terminal will increase PSA's total port capacity by
about 50% to 50m TEUs by 2017. Phases 3 and 4 will have a total of 15 new berths, 6km
new quay meter and up to 18m in berth depth. According to PSA, this will further
strengthen Singapore's position as the world's largest transshipment hub.
c) Indonesia has massive plans to develop 24 ports. President Jokowi said US$6b will be
invested to rejuvenate the nation’s seafaring ports. Amongst them, the Tanjung Sauh
Port was developed on the island to support Batam as a free-trade zone. IHS believes
Tanjung Sauh will challenge the current three SOM ports in transhipping cargoes.
Tanjung Priok will also see a new Priok Port that will be developed progressively in
three phases, which will be fully ready by 2023. By then, the annual capacity will be
boosted three-fold to 18m TEUs (from 5m TEUs currently) and will be able to
accommodate 18,000 TEU container ships. Other ports targeted for developments lie in
West Kalimantan, South Sumatra, Sorong and plans to turn North Sumatra’s Kuala
Tanjung port into one of the world’s largest. Kuala Tanjung may also take a slice of the
pie in the SOM route with as much as 2m TEUs of capacity to be operational by 2019.
FIGURE 39: LOCATION OF KUALA TANJUNG ON THE SOM
Source: Port of Rotterdam, UOB Kay Hian
Shipping consolidation. There is an ongoing trend of consolidation amongst the world’s

major cargo shipping lines, with as many as 20 shipping alliances already being formed.
Merger talks between CSCL and COSCO had been ongoing, while recently CMA CGM had
entered into an agreement to purchase Neptune Orient Lines (NOL). CSCL and CMA CGM
are part of the O3 Alliance, with a combined 42% of Westports’ total throughput. NOL and
COSCO already have existing alliances and agreements with other ports in PSA and PTP.
Assuming both mergers happen, the outcome of a shift in container traffic allocation between
PSA and Westports could happen either way, given existing Alliance agreements between
the shippers and ports are not aligned. Also, the shipping liners may want to retain both ports
for the purpose of ‘dual-hub’. These events would be another wildcard, which will only
materialise by 2017 at the earliest, given that the existing shipping Alliance conditions will be
upheld until the renewal period by end-16/2017. However in our opinion, there are more
downside risks (ie Westports losing out the container traffic from CSCL and CMA CGM in
favour of other ports’/other alliances’ agreements) rather than upside risk (Westport gaining
new customers’ container volume from NOL and COSCO) because we believe Westports
does not have enough capacity to absorb significant volume from additional customers,
without straining its utilisation.

Financial Statement
FIGURE 40: PROFIT & LOSS
Net turnover 1,348 1,503 1,589 1,750 1,911
EBITDA 689 789 893 945 1,053
Depreciation & Amortisaiton 124 147 155 168 185
EBIT 564 643 738 777 869
Associate Contributions 0 0 0 0 0
Net Interest Income/(Expense) (47) (64) (70) (74) (80)
Pre-tax Profit 517 579 668 703 789
Tax (82) (67) (167) (176) (197)
Minorities 0 0 0 0 0
Net Profit 435 512 501 527 592
Net Profit (Adjusted) 406 441 501 527 592
FIGURE 41: BALANCE SHEET

Fixed Assets 1,159 1,322 1,462 1,591 1,711
Other LT Assets 1,873 1,877 1,891 2,002 2,140
Cash/ST Investment 342 445 403 381 382
Accounts Receivables/Debtors 200 203 206 227 248
Other Current Assets 0 0 79 130 181
Total assets 3,574 3,846 4,041 4,331 4,662
Accounts Payables/Creditors 350 218 222 245 267
ST Debt 0 0 0 0 0
Other Current Liabilities 42 32 32 32 32
LT Debt 900 1,150 1,216 1,352 1,512
Deferred Liability 242 273 273 273 273
Other LT Liabilities 435 409 409 409 409
Shareholders' Equity 341 341 341 341 341
Minority Interest 0 0 0 0 0
Total Liabilities & Equity 3,574 3,846 4,041 4,331 4,662

FIGURE 42: CASH FLOW

Operating 687 613 656 697 778
Pre-tax Profit 517 579 668 703 789
Tax (53) (48) (167) (176) (197)
Depreciation & Amortisation 124 147 155 168 185
Working Capital Changes 51 (141) 0 1 2
Non-cash Items 0 0 0 0 0
Other Operating Cashflows 48 77 0 0 0
Investing (468) (309) (309) (408) (443)

Capex (Growth) (236) (256) (232) (231) (233)
Investments (372) (65) (77) (177) (210)
Proceeds from Sale of Assets 0 0 0 0 0
Others 140 12 0 0 0
Financing (207) (208) (359) (310) (335)

Dividend Payments (1,057) (352) (376) (395) (444)
Issue of Shares 738 0 0 0 0
Proceeds from Borrowings 450 250 216 286 310
Loan Repayment (245) 0 (150) (150) (150)
Others/Interest Paid (92) (106) (49) (51) (51)
Net Cash Inflow (Outflow) 13 97 (11) (22) 1

Beginning Cash & Cash Equivalent 305 318 414 403 381
Changes Due to Forex Impact 24 30 0 0 0
Ending Cash & Cash Equivalent 342 445 403 381 382
FIGURE 43: KEY METRICS

Profitability
EBITDA Margin 51.1 52.5 56.2 54.0 55.1
Pre-tax Margin 38.3 38.5 42.0 40.1 41.3
Net Margin 32.3 34.1 31.5 30.1 31.0
ROA 11.9 11.9 12.7 12.6 13.2
ROE 26.2 26.2 27.4 27.0 28.3
Growth
Turnover 9.9 11.5 5.8 10.1 9.2
EBITDA 15.2 14.6 13.2 5.8 11.5
Pre-tax Profit 18.8 11.9 15.4 5.2 12.3
Net Profit 20.5 17.7 (2.2) 5.2 12.3
Net Profit (Adjusted) 24.6 8.8 13.6 5.2 12.3
EPS (57.3) 8.8 13.6 5.2 12.3
Leverage
Debt to Total Capital 56.1 65.2 64.4 66.9 69.7
Debt to Equity 56.1 65.2 64.4 66.9 69.7
Net Debt/(Cash) to Equity 34.8 40.0 43.0 48.0 52.1
Interest Cover (x) 14.6 12.3 12.7 12.8 13.2

Appendix
BOARD OF DIRECTORS
Key Personnel Experience and Background
Tan Sri Datuk Gnanalingam A/L Gunanath Lingam  Served as a Director of the Company on 1 January 2009 and as Executive Chairman of the Company in 2000. Prior to
Non-Independent Executive Chairman that, he was the Managing Director of WestPorts Malaysia Sdn Bhd from 1995 to 1999.
 Started his career with the British American Tobacco group in 1968. In 1988, he started his own marketing company
called G-Team Consultants Sdn Bhd which acted as the Corporate Consultant for the marketing operations of Radio
Television Malaysia
 He successfully secured the concession to operate Westports in 1994. In March 2015, he was appointed a member of
the National Export Council.
 His eldest son, Ruben Emir Gnanalingam, is the Chief Executive Officer of the Company.
Tan Sri Dato’ Nik Ibrahim Kamil Bin  Currently serves as the Chairman of the Remuneration Committee and a member of the Audit and Risk Management
Tan Sri Nik Ahmad Kamil Committee of the Company.
Independent Non-Executive Director
 He was the Managing Director of The New Straits Times Press (Malaysia) Berhad (“NSTP”) until 1991.
 He has been appointed to the board of many public companies. He was the Executive Vice Chairman of Palm Resort
Berhad, a Director of Camerlin Group Berhad (now known as Adjuvant Resources Berhad), Chairman of Southern
Investment Bank Berhad, Chairman of QSR Brands Berhad and Chairman of KFC Holdings (Malaysia) Berhad.
 He is currently the Non-Executive Chairman of OCB Berhad and Non-Executive Chairman of Lion Gold Corp Ltd
Ruben Emir Gnanalingam Bin Adbullah  Served as CEO since 15 Jan 2009, and is the eldest son of the Executive Chairman
Chief Executive Officer
 Started his career as a trainee at the operational level in WMSB in 1999 before resigning to set up a venture capitalist
business known as The Makmal Group in 2000. He sold his investments and exited this business in mid-2005.
 Holds a Bachelor of Science (Honours) degree in Economics from the London School of Economics and Political
Science, UK. He also holds a diploma in Port Management awarded by the University of Cambridge Local
Examinations Syndicate
John Edward Wenham Meredith  A British citizen, Served as a Director since 15 Dec 2000
Non-Independent Non-Executive Director
 Was Group Managing Director of Hutchison Port Holdings (HPH) from 1996 to 2013. Appointed Non-Executive Deputy
Chairman of HPH on 1 January 2014.
 Has been the Deputy Chairman and Non-Executive Director of Hutchison Port Holdings Management Pte. Limited, the
Trustee-Manager of Hutchison Port Holdings Trust (a business trust listed in Singapore), since February 2011.
 Has more than 40 years of experience in the container terminal business.
IP Sing Chi  Served as a Director since 5 April 2013.

Non-Independent Non-Executive Director
 In 2005, he was appointed to the board of HPH. He is currently the Group Managing Director of HPH.
 Has over 35 years of experience in the maritime industry. A member go the Hong Kong Port Development Council until
2014 and the founding Chairman of the Hong Kong Container Terminal Operators Associated Limited
 He began his career in the maritime business when he joined Sun Hing Shipping Co., Ltd. in 1979 as an Account
Executive. Subsequently, he joined Hongkong International Terminals Limited in 1993 as General Manager of
commercial and acted as the Managing Director from 1998 to 2011.
Dato’ Abdul Rahim Bin Abu Bakar  Served as a Director since 1 April 2003.
 He started his career with National Electricity Board (NEB) of the States of Malaya in 1969. He was appointed as the
Managing Director of MMC Engineering Services Sdn Bhd and later as Managing Director of MMC Engineering Group
Bhd.
 In May 1995, he joined PETRONAS Gas Berhad (PGB) to assume the position of Managing Director and Chief
Executive Officer, until August 1999. In September 1999, he moved on to take up the post of Vice President of
Petroliam Nasional Berhad
 Currently the Independent Non-Executive Director of Telekom Malaysia Berhad and Global Maritime Ventures Berhad.
 He is a Professional Engineer registered with the Board of Engineers Malaysia

Key Personnel Experience and Background
Dato’ Yusli Bin Mohamed Yusoff  Served as a Director since 13 March 2013.
 He was the Group Managing Director of Shapadu Corporation Sdn Bhd from 1995 to 1996 and the Chief General
Manager of Sime Merchant Bankers Berhad from 1996 to 1998. He served concurrently as the Executive Vice
Chairman of Intria Berhad and Managing Director of Metacorp Berhad from 1998 to 1999. He was also the CEO of
CIMB Securities Sdn Bhd from 2000 to 2004 and served as Chairman of the Association of Stockbroking Companies
Malaysia in 2003. Dato’ Yusli also served as CEO/Executive Director of Bursa Malaysia Berhad and led Bursa
Malaysia to its listing in 2005.
 Elected and served as the State Legislative Assemblyman for Bukit Nanas (1969-74) and as a Member of Parliament
for Bandar Kuala Lumpur/Bukit Bintang (1974-90).
 Is a member of the Institute of Chartered Accountants in England and Wales, the Malaysian Institute of Accountants
and is also an honorary member of the Institute of Internal Auditors Malaysia.
Chan Chu Wei  Served as a Director since 15 Dec 2000.

Non Independent Non-Executive Director
 She began her career with Tourist Development Corporation of Malaysia as Assistant Director in 1977 and moved on
to join Malaysian Tobacco Company Berhad a year later, where she worked in the human resources and marketing
divisions over a ten (10) year period
 In 1988, she joined G-Team Consultants Sdn Bhd as a General Manager. G-Team Consultants Sdn Bhd acted as the
Corporate Consultant for the marketing operations of Radio Television Malaysia from 1988 to 2000. Ms. Chan joined
WMSB in 1994 as an Executive Director and assisted in drawing up the blueprint proposal that secured the
concession for Westports
 She oversaw both marketing and operational leadership roles until 2008, especially in container operations. She has
been a Non-Executive Director of PKT Logistic Group Sdn Bhd since 2014.
Jeyakumar Palakrishnar  Served as a Director since 13 March 2013.

 He obtained a Bachelor of Law (Honours) degree from University of Londo UK in 1993 and was called to the
Malaysian Bar in 1995 and has since been practising as an advocate and solicitor.
 He is the founding partner of the legal firm, Messrs Zahir Jeya & Zainal, established in 1996. He also serves as a
panel member of the Disciplinary Committee appointed by the Malaysian Bar Advocates & Solicitors’ Disciplinary
Board.
Tan Sri Ismail Bin Adam  Served as a Director since 30 Aug 2013.
 He started his career in 1972 as an Officer of the Malaysian Administrative and Diplomatic Service and was posted as
an Assistant Director in the Ministry of Trade and Industry. He was Chief Administrative Officer in the Department of
Statistics Malaysia, Director General of the National Productivity Corporation (now known as the Malaysia Productivity
Corporation), the Secretary General of the Ministry of Health and the Director General of Public Service. He retired
from civil service in 2010.
 Currently, he serves as an Independent Non-Executive Director of BIMB Holdings Berhad, as Group Chairman of
Prasarana Malaysia Berhad and as an Independent Non-Executive Director of Malaysian Pharmaceutical Industries
Sdn Bhd.
Kim, Young So  A South Korean, Served as a Director since 5 Sept 2013.

 Mr. Kim began his career with Banque Paribas as a Manager of the corporate banking division in 1989. He joined Dow
Chemical Korea Ltd in 1992 as a Credit Manager and was subsequently promoted to a Treasurer in 1994. In 1996, he
joined Hanjin Shipping Co., Ltd. as a General Manager and was subsequently promoted to a Managing Director for
South East and West Asia.
 In 2009, he started an investment advisory business known as Braintrust Partner Co., Ltd. and has been the Executive
Managing Director since then.

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Westports Holdings 20151217 (Initiation)

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Westports Holdings 20151217 (Initiation)

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M a l a y s i a Thursday, 17 December 2015

Westports Holdings (WPRTS MK) SELL

KEY FINANCIALS 120

Refer to last page for important disclosures. 1

Refer to last page for important disclosures. 2

We have a contrarian conservative view on capacity growth. While CT8/CT9 expansion

Refer to last page for important disclosures. 3

FIGURE 1: STAGE 1 DCF

Refer to last page for important disclosures. 4

FIGURE 2: STAGE 2 DCF

FIGURE 3: DCF ASSUMPTIONS

Refer to last page for important disclosures. 5

FIGURE 4: CONTAINER TERMINALS AND PORTS – PEER COMPARISON

Refer to last page for important disclosures. 6

Scenario analysis to DCF. Westports is already well-covered by analysts; however the

FIGURE 5: DCF SCENARIO ANALYSIS FROM WACC ASSUMPTIONS

FIGURE 6: DCF SCENARIO ANALYSIS FROM CONTAINER VOLUME GROWTH ASSUMPTIONS

FIGURE 7: DCF SCENARIO ANALYSIS FROM CONTAINER TARIFF ASSUMPTIONS

FIGURE 8: DCF SCENARIO ANALYSIS FROM COST ASSUMPTIONS

Refer to last page for important disclosures. 7

FIGURE 9: REVENUE AND PAT FORECASTS

FIGURE 10: NET GEARING FORECASTS FIGURE 11: CAPEX BY COMPONENTS

Seasonality. Historically, 3Q and 4Q are strong in terms of container throughput growth,

Refer to last page for important disclosures. 8

FIGURE 12: CONTAINER REVENUE PROJECTIONS

We expect moderation in throughput growth in FY16. Our assumptions are: a) weakness

FIGURE 13: CONTAINER (GATEWAY) MAY SEE FURTHER WEAKNESS

Source: Westports, UOB Kay Hian

Refer to last page for important disclosures. 9

b) We project transshipment throughput to grow at a slower pace in 2016, due to

FIGURE 14: WESTPORTS’ CONTAINER (TRANSHIPMENT) TRADE LINES

Source: Westports, UOB Kay Hian

FIGURE 15: CONTAINER THROUGHPUT PROJECTIONS AND KEY ASSUMPTIONS

Container Throughout (TEU m) 7.5 8.4 8.9 8.9 9.6 10.3

Refer to last page for important disclosures. 10

FIGURE 16: TARIFF PROJECTIONS AND ASSUMPTIONS

FIGURE 17: PORT OPERATING COST AND EBITDA PROJECTIONS

EBITDA 688.6 789.2 893.3 945.0 1,053.8 1,136.5

Refer to last page for important disclosures. 11

FIGURE 18: WESTPORTS OVERALL CONTAINER MARKET SHARE TREND

Refer to last page for important disclosures. 12

FIGURE 21: WESTPORTS POSITION VS MALAYSIA PORTS CONTAINER TRAFFIC GROWTH

Source: Ministry of Transport Malaysia (MOT), Westports, UOB Kay Hian

Refer to last page for important disclosures. 13

FIGURE 22: PRODUCTIVITY SNAPSHOTS

FIGURE 23: CONTAINER VESSEL SIZE

Source: Westports, UOB Kay Hianx

Refer to last page for important disclosures. 14

FIGURE 24: LOCATION OF WESTPORTS RELATIVE TO STRAITS OF MALACCA

Source: Westports, UOB Kay Hian

Refer to last page for important disclosures. 15

FIGURE 25: SUMMARY OF REVENUE SOURCES

Source: Westports, UOB Kay Hian

Refer to last page for important disclosures. 16

Refer to last page for important disclosures. 17

FIGURE 29: CAPACITY EXPANSION AND THROUGHPUT FORECAST

Source: Westports, UOB Kay Hian

FIGURE 30: PORT LAYOUT (FUTURE DEVELOPMENT IN YELLOW – CT8/CT9)

Source: Westports, UOB Kay Hian

Refer to last page for important disclosures. 18

FIGURE 31: KEY CUSTOMERS

Source: Westports, UOB Kay Hian

Refer to last page for important disclosures. 19

Refer to last page for important disclosures. 20