Broker: UOB Kay Hian
Date of Report: 10 June 2025

Westports Holdings Bhd: Container Volume Growth Steady, But Tariff Upside Fully Priced In – Is There Room for More?

Overview: Westports Holdings Bhd at a Glance

Westports Holdings Bhd (WPRTS MK) operates as a key integrated facility at Port Klang, Malaysia’s premier port, offering container-handling services and a range of value-added services (VAS) such as storage, reefer, container freight, and removal support. The company’s share price stands at RM4.40, with a target price of RM4.60, indicating a modest downside. The company’s market capitalization is RM15.86 billion (US\$3.67 billion) with 3,410 million shares issued. The Gnanalingam family holds a 45.5% stake, while the Employees Provident Fund (EPF) owns 9.2%.

Recent Performance and Market Position

Westports’ container volume for the first four months of 2025 shows tangible signs of recovery, particularly within the transshipment segment. The company’s growth trajectory aligns with the anticipated resurgence in trade during the current 90-day tariff cooldown period, allowing it to maintain its existing volume growth guidance. Despite this, the company faces several constraints:

• No significant catalysts are on the horizon beyond the outcome of the MSC-Hutchison deal.
• Tariff hikes are already factored into the share price, regardless of whether they are implemented or deferred.
• The impending IPO of MMC Port could influence Westports’ valuations due to their status as container port peers and partners in a JV cruise terminal.

Container Volume Trends: Port Klang and Regional Comparisons

Port Klang’s container throughput as of April 2025 is on track, supported by a resurgence in transshipment flows. While gateway volumes remain subdued, growth in transshipment boxes is evident:

• Total volume growth for Port Klang in April 2025 recovered to 3%.
• Year-to-date (YTD) growth is at 4%, progressing toward the 2025 target of 15 million TEUs (2.3% growth).
• Transshipment volumes are rebounding due to a rush of China-bound cargoes to the US during the 90-day tariff pause.
• Linerlytica projects over 25% growth in shipping liner capacity additions from the Far East in June, following April-May lows.
• Singapore’s port operations face severe disruptions, with transshipment cargo delays of up to two weeks.

Despite these positive trends, Westports’ growth lags behind key Straits of Malacca peers:

• Port of Singapore Authority posted robust growth of 7% YoY in April and 6% YTD.
• Port of Tanjung Pelepas (PTP), a JV between MMC Group and APM Terminals, set new monthly container handling records in March, April, and May 2025 (1.18–1.27 million TEUs each), surpassing Port Klang’s current monthly run-rate.

Operational Capacity and Challenges

Westports’ CEO, Ruben Gnanalingam, maintains a single-digit volume growth outlook, emphasizing that further expansion is limited by the company’s lack of spare capacity. Notable operational constraints include:

• Average vessel berth waiting times at Port Klang remain at 2–3 days.
• Yard congestion is at a critical 90%.

Tariff Hike History and Market Impact

The last 30% tariff hike at Westports was implemented in two stages, with delays in both phases. The share price surged over 80%, peaking at RM4.56 in early 2015, before trending downward. The current proposal is for a 30% hike across three phases (15%/10%/5%), with a more structured and transparent review mechanism.

Key Financials: 2023–2027

Key Drivers and Risks for 2025

With muted gateway growth and tariff hike expectations already factored in, 2025 earnings for Westports will primarily depend on the sustainability of high value-added services (VAS). Key points include:

• Regulatory checks and raids have negatively affected gateway volumes related to metals, plastics, and illegal waste.
• Operational disruptions in the value chain, such as delays in heavy vehicle regulations, could further impact container handling.
• Elevated demand for storage, a key VAS, is currently offsetting volume losses and is expected to remain strong until the second half of 2025.

MMC Ports IPO: A Potential Game Changer

MMC Group’s plan to relist its port assets by late 2025 at an estimated valuation of RM24–27 billion, aiming to raise RM6–7 billion, could have notable implications for Westports. Although detailed financials for MMC’s port assets are not public, the IPO’s scale and history of corporate governance issues may influence WPRTS’ trading multiples and investor perception.

MMC’s strategic assets include:

• PTP (Transhipment hub, Southern Region) – 3.17m TEUs
• Johor Port (Dry Bulk, Conventional Port) – 0.25m TEUs
• Northport (Port Klang) – 0.84m TEUs
• Penang Port – 0.33m TEUs
• Tanjung Bruas (Melaka & Central Region) – 0.08m TEUs
• Andaman Port (Kedah) – NA

Other MMC assets include SPTS Services and cruise terminals in Langkawi, Port Klang, and Swettenham Pier. MMC is regarded as a global operator, comparable to Global Infrastructure Partners (GIP), Terminal Investments, and Hutchison Ports.

Valuation and Recommendation

The recommendation for Westports remains HOLD, with a sum-of-the-parts (SOTP) target price of RM4.40, based on discounted cash flow (DCF) analysis through 2054. This valuation implies an 18x forward PE for 2025. While the WPRT2 expansion is progressing, the medium-term outlook is subdued, and risk-reward remains balanced. Global M&A multiples for container ports typically range between 8–10x EV/EBITDA, but trading upside exists if the MSC-CK Hutchison deal is completed, potentially allowing WPRTS to trade up to RM5.17 based on a 13.5x EV/EBITDA multiple.

Environmental, Social, and Governance (ESG) Highlights

• Environmental: New targets are set for Scope 1 net zero carbon emissions by 2050. Scope 2 reductions will depend on electrified equipment, operational electricity intensity, and the national grid’s emission factor. Safety initiatives have led to fewer incidents in 2023 (791) compared to 2022 (699) due to improved reporting.
• Social: Board diversity has improved, with female representation at 50% in 2023 (up from >30% in 2022). Social investments for 2021–2023 totaled RM10.2 million.
• Governance: Six out of ten board members are independent, despite significant family representation.

Port Klang Container Volume Statistics: 2024 vs. 2025 Highlights

YTD 2025 container volume for Port Klang is up 3.7%, with Westports contributing 2.5% growth and Northport 7.8%.

Profit & Loss, Balance Sheet, and Cash Flow Highlights

EBITDA margins are projected to improve from 62.1% in 2024 to 63.8% in 2027, while ROE is expected to remain robust above 21%.

Conclusion: Balanced Outlook Amidst Industry Shifts

Westports Holdings Bhd maintains steady volume growth and strong margins but faces capacity constraints and muted catalysts, with tariff hikes and external developments already priced in. The upcoming MMC Ports IPO could reshape the competitive landscape, and any material changes in the regulatory or M&A environment may alter the valuation outlook for Westports. Investors are advised to monitor these developments closely, especially as the industry navigates congestion, regulatory shifts, and evolving ESG standards.