ANALYSTS POSITIVE ON WESTPORTS DESPITE WEAKER Q2 EARNINGS

KUALA LUMPUR, July 27  -- Despite Westport Holdings Bhd reported a weaker net profit for the second quarter ended June 30, 2020 (Q2 2020), analysts remain positive on the port operator.

In a filing with Bursa Malaysia last Friday, Westports said its net profit eased to RM134.34 million for Q2 2020 from RM166.32 million a year earlier due to a decrease in operational revenues amid the COVID-19 pandemic. 

Group revenue fell to RM431.60 million from RM454.45 million in the same period last year, it said.

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In a separate statement, Westports said it handled 4.80 million twenty-foot equivalent units (TEUs)  container throughput during the first six months of 2020 as the COVID-19 pandemic disrupted economic activities across the world.

Describing the company's recovery is on track, Maybank Investment Bank Bhd Research (Maybank IB Research) had maintained its "hold"  rating on Westports with a higher target price (TP) of RM3.90 from RM3.65 previously.

"Q2 2020 core net profit was weaker but still above expectations on better-than-expected volume. 

"The volume has rebounded since Jun, potentially due to the pent-up demand, and we maintain our financial year ending Dec 31, 2021-22 estimate (FY21-22 E) earnings per share (EPS) but raise our FY20 estimate EPS by 12 per cent," it said.

Meanwhile, AmInvestment Bank Bhd upgraded its "buy" call on Westports from "hold" previously with a higher fair value of RM4.45 from RM3.81 earlier.

"The upgrade in our assumption is also to reflect Westports’ guidance for only a 'high single-digit contraction' in its container throughput volume in the second half of FY20 underpinned by the robust glove manufacturing and recycled paper processing activities locally, coupled with the recovery in global trade," it said.

The research house believes the worst may be over for seaport operators as economies, businesses and borders reopen, translating to a recovery in global trade, and hence, improvement in seaports’ throughput. 

Looking beyond the COVID-19 pandemic, AmInvestment Bank said the outlook in the region (Malaysia included) is resilient, underpinned by global trade and investments in the manufacturing sector that generates 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 United States-China trade war. 

"Westports has charted a long-term expansion plan to capitalise on these," it said.

At 10.55am, Westports' share rose 16 sen to RM3.81 with 263,200 shares transacted.

--BERNAMA