KUALA LUMPUR: As Malaysia’s largest marine port operator, Westports Holdings Bhd is positioned front and centre to benefit from a pick up in the country’s trading activities, underpinned by a robust recovery in intra-Asia trade.
In its latest company update, RHB Research said it is turning more optimistic on the group’s prospects as there has been a shift in the country’s and region’s trade prospects.
“RHB Economics reaffirms its optimistic stance on Malaysia’s trade prospects for 2024, supported by a brighter global and regional economic landscape; the bolstering economic performance of China; and resurgence in the global technology cycle,” it said.
In particular, RHB expects the growth potential in the electrical and electronics (E&E) sector, which makes up about 40% of Malaysia’s exports, to attract more foreign direct investment (FDI).
RHB credits the government for its initiatives to stimulate FDI including tax incentives, reinvestment allowances, relocation incentives, and regulatory streamlining.
“The initiatives are aimed at bolstering Malaysia’s FDI inflows relative to nominal GDP, which has generally exceeded those of other emerging markets in Southeast Asia, underscoring its growth prospects,” said RHB.
It added that Westports will be the primary beneficiary of these developments, particularly given the intra-Asia segment accounts for 65-67% of the group’s throughput volume.
RHB also expects the growth momentum, which began with a surge in container volume in 2023, to continue in 1Q24.
It said container volume is expected to remain within the 2.3-2.8 million TEU range, as trade activities pick up domestically and across the intra-Asia region.
“As such, we estimate 1Q24 to see a YoY improvement, pencilling a core net profit within the range of MYR195-200mil,” it said.
Looking further afield, Westports’ plans to double its capacity from 14 million TEUs to 27 million TEUs over a projected 20-year period will cater to the long-term increase in demand, said RHB.
Picking out Westports among the country’s infrastructure plays, the research firm upgraded the share to “buy” from “neutral”, and increased the target price to RM4.52 from RM4.12.