New: Westports to see neutral impact from Red Sea disruptions

There is very little impact on Westports Holdings from the Red Sea disruptions with container traffic still moving in the right direction, says analysts.

“We assume a largely neutral impact from the Red Sea disruption on Westports’ container throughput volume given that 1) container traffic is still moving, unlike the Suez Canal blockade in 2021, and 2) country’s low trade dependency (8% in 2023) with Europe,” says Ambank.

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Currently, no visible impact can be seen at the port, as guided by management. Even so, we think there may be some shipping delays as liners re-route around Cape of Good Hope, adding 14 days of transit period to 39-41 days from only 25-27 days through the Red Sea.

Westports not affected – yet

“Against the backdrop of shipping schedule disruptions, we expect a slightly lower port throughput in 1QFY24, followed by a recovery in 2QFY24 on a resumption of Red Sea transit. Hence, we made no changes to FY23F-FY24F annual volume guidance of 6% as the quarterly fluctuation could normalise this year,” it says.

Analysts also maintain a BUY call on Westports Holdings with a higher fair value (FV) of RM4.27/share (RM4.03/share previously) from a rolled-forward FY24F P/E of 18x, in line with its 3-year average and a 3% premium of an unchanged 4-star ESG rating.

The 3-month share price rally of 11% reflect investor optimism on Westports as a key beneficiary of regional nearshoring and friendshoring activities due to China+1 strategy. We understand that Westports achieved an all-time record high by handling more than 1mil TEUs in December 2023, surpassing the monthly average of 0.8mil TEUs in FY2022.