Westports Holdings Bhd is navigating ongoing challenges in the transportation and logistics sector, particularly in Asia-Europe transhipment. MIDF Amanah Investment Bank has maintained a NEUTRAL call on the stock, with an unchanged target price of RM4.30. This decision reflects a cautious outlook, despite a 16.3% year-to-date increase in the share price, which trades at 15.6 times its financial year 2025 (FY25) forecast earnings.
The weakness in the Asia-Europe transhipment is expected to continue, largely due to irregular vessel calls and blank sailings caused by the Red Sea crisis. This trade lane has seen a 10% year-on-year (YoY) decline in container volume in the first half of FY24 (1H24). In contrast, the intra-Asia trade lane, which accounts for over 60% of Westports' total volume, grew by 6.5% YoY during the same period. Some carriers have shifted focus to the Asian region, restructuring services and redirecting vessels to mitigate disruptions.
Westports' container yard occupancy, which peaked at 100% in June 2024, is beginning to normalise, now standing at approximately 75%. Although this remains above the ideal 65% recorded in December 2023, the higher yard occupancy has supported value-added services (VAS) revenue. VAS contributed 21.6% to container revenue in the second quarter of FY24, an increase from 18.4% in the same period last year. Westports is expected to continue benefiting from ad-hoc vessel calls, as neighbouring Northport also reported receiving 171 such calls from January to August 2024.
Management is projecting low single-digit growth in container volume for FY24. As of 1H24, container volume increased by 3.1% YoY, with gateway volume up 11.2%, while transhipment volume declined by 2.6%. Gateway operations, which involve higher container handling charges, are expected to account for around 40% of total volume for the rest of the year, up from the historical 30%. The container volume for 2H24 is expected to increase by 2.2% YoY, contributing to a full-year growth target of 4.2%.
