Latest news with #RM6.41
New Straits Times
3 days ago
- Business
- New Straits Times
CGS raises Westports target price to RM6.41 on strong storage income
KUALA LUMPUR: CGS International has maintained its "Add" call on Westports Holdings Bhd, raising its target price to RM6.41 following stronger-than-expected storage income and improved earnings visibility. 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.
New Straits Times
04-07-2025
- Business
- New Straits Times
Port charges hike, container volume growth to boost Westports' Q3 earnings
KUALA LUMPUR: Westports Holdings Bhd's third-quarter 2025 (3Q25) results are expected to benefit from the 15 per cent increase in port charges effective July 15, according to CGS International. In a note, the firm said the anticipated year-on-year (YoY) growth in average revenue per twenty-foot equivalent unit (ARPT), coupled with sequentially stronger container volumes in 2Q25, could serve as potential share price re-rating catalysts for Westports. "The 15 per cent rise in port charges from July 15 will also boost 3Q25 results, which is why we reiterate 'Add' on Westports," it said. CGS has raised its target price to RM6.41, citing expectations of stronger storage income amid sustained high yard utilisation. It also noted that Westports' yard utilisation remained elevated at 90 per cent or higher during the first half of 2025 (1H25). This was partly due to a government crackdown on illegal e-waste and metal waste imports since 2024. The stricter customs checks have caused an estimated 5,000 to 6,000 containers to remain stranded at Westports' yard, some for up to 60 days. These containers are expected to either be cleared for entry into Malaysia or re-exported to their ports of origin. If importers cannot be identified, Westports will recover storage charges from the shipping lines. CGS said this backlog contributed to a 4.3 per cent YoY increase in ARPT in 1Q25 and expects the positive trajectory to have continued into 2Q25. Meanwhile, CGS also believes that container volume growth in 2Q25 likely exceeded the modest 0.6 per cent YoY growth seen in 1Q25. This was driven by the launch of the Gemini Cooperation shipping alliance on Feb 1, which led to changes in shipping routes and cargo flows that boosted Westports' transshipment volumes. In April, Evergreen shifted two of its container services from Port of Tanjung Pelepas to Westports, contributing further to sustained volume gains. On the impact of the US-China trade war, CGS said shipping lines had initially diverted vessels to alternative routes, but restored capacity between the two countries as US demand rebounded after mid-May. These abrupt changes in vessel deployment contributed to higher transshipment activity at Port Klang and Singapore, according to Westports. Despite the positive developments, CGS cautioned that downside risks remain for the group. These include the threat of a global recession that could weigh on container trade volumes, and the possibility of the US reintroducing punitive trade tariffs on global economies, excluding China, once the current 90-day reprieve ends on July 8. CGS has lowered its cost of equity assumption for Westports to 8.2 per cent from 9.4 per cent, citing a lower risk profile for the group following improved clarity on future port charges.
