CGS raises Westports target price to RM6.41 on strong storage income
The research firm lowered Westports' cost of equity from 9.4 per cent to 8.2 per cent, reflecting increased confidence after the government gazetted new port tariffs and committed to annual hikes.
Container yard utilisation surged above 90 per cent in the first half of 2025, driven by a Customs crackdown on illegal waste imports, which led to an influx of stranded containers.
"As many as 5,000 to 6,000 affected boxes remain in the yard, some for up to 60 days. These will eventually be cleared either through entry into Malaysia or re-export," it said in a research note.
This situation lifted average revenue per twenty-foot equivalent unit (ARPT) by 4.3 per cent year-on-year in 1Q25, with CGS expecting continued positive momentum in 2Q25.
"We believe the ARPT remained on a positive YoY trajectory in 2Q25 due to the situation described above," it added.
CGS also projected stronger volume growth in 2Q25, supported by the launch of the Gemini Cooperation shipping alliance and the relocation of Evergreen's services from Port of Tanjung Pelepas to Westports in April.
"We estimate container volume growth in 2Q25 exceeded 1Q25's 0.6 per cent YoY increase, boosted by Hapag-Lloyd's container reshuffling and Evergreen's shift of two services to Westports," it said.
Additional tailwinds may have come from transhipment volume gains linked to US-China trade war disruptions and vessel redeployments during the temporary tariff suspension.
While CGS currently forecasts a 1.4 per cent YoY contraction in Westports' container throughput for 2025, it flagged potential upside to this estimate.
Looking ahead, Westports' earnings are expected to benefit from a 15 per cent tariff hike effective July 15. However, CGS cautioned that downside risks remain, particularly from a potential global recession and the possible reinstatement of US punitive tariffs after the 90-day suspension ends on July 8.
"We believe Westports will post strong 3Q25 results following the tariff hike. In the longer term, we are optimistic about a potential shift in how port charges are structured," CGS said.
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