Westports to be supported by tariff hikes and volume movements

PETALING JAYA: Despite concerns over a global trade slowdown, Westports Holdings Bhd can expect earnings sustainability, supported by tariff hikes and resilient volume movements, says Hong Leong Investment Bank (HLIB) Research.

Its proposed dividend reinvestment plan (DRP) would enhance shareholder value and support medium-term capital expenditure requirements, said the research house.

It maintained its “buy” call on the stock with a target price of RM5 a share.

HLIB Research did not foresee any material impact on Westports’ performance despite global trade slowdown concerns as it is already operating at an optimal utilisation rate of about 80%, based on its 14 million twenty-foot equivalent unit (TEU) capacity in 2024.

Although there are new capacities from container terminals (CT) 10 and CT 11, they are expected to only come online by mid-2028 and end-2029 respectively.

As such, Westports’ volume capacity handling growth is capped over the medium-term.

Prior to the implementation of new tariffs, management had guided for modest volume growth of just 400,000 TEUs annually (about 4%) due to capacity constraints.

Furthermore, the global trade environment remains fluid, with potential for diplomatic resolutions.

Westports had adopted the DRP, which would be priced at a discount of less than 10% to the five-day volume-weighted average market price of its shares immediately preceding the price fixing date.

It was also likely to benefit from a potential port tariff hike revision between September and October, pending government approval.