Maybank Investment Bank Berhad
June 17, 2025

Westports Holdings: New Tariffs Drive Positive Outlook and Earnings Upside

Introduction: Tariff Reforms Set to Boost Westports Holdings’ Growth

Westports Holdings Bhd, a key transshipment hub at the Straits of Malacca and a major port serving Malaysia’s Klang Valley, is poised for transformative growth following the formalisation of Port Klang’s new tariff structure. Maybank Investment Bank Berhad has upgraded its recommendation on Westports to BUY, citing early implementation of tariff hikes and significant increases in storage charges as pivotal factors that could offset margin pressures and drive future earnings. The report also raises the DCF-based target price by 22% to MYR5.84, reflecting enhanced expectations for FY25E, FY26E, and FY27E.

Key Highlights: What’s Changing at Westports?

• 30% Cumulative Tariff Hike Over 1.5 Years: New tariffs officially gazetted on June 13, 2025, will be implemented in three phases, resulting in a 30% cumulative increase by January 2027.
• Steep Storage Tariff Increase: Effective June 15, 2025, a sharp rise in storage charges aims to address yard congestion and more accurately reflect land use costs.
• Improved Margin Outlook: Higher tariffs and storage fees are expected to cushion against potential volume slowdowns and rising operational inefficiencies.
• Earnings Forecasts Raised: FY25E/26E/27E earnings forecasts have been increased by 9%/12%/18%, with revenue and net profit projected to rise accordingly.
• Risks Remain: Potential risks include weaker global trade, persistent congestion, delay in contract renegotiations, and capex overruns.

Tariff Hike Timeline and Impact

The new tariffs will roll out in the following phases:

• Phase 1: Average increase of approximately 15%, effective July 15, 2025.
• Phase 2: Additional 10% hike, effective January 1, 2026.
• Phase 3: Final 5% increase, effective January 1, 2027.

This results in a cumulative 30% hike over 1.5 years. The scope covers terminal handling, shifting, restow, storage, and heavy lift or uncontainerised cargo.

Addressing Yard Congestion with Higher Storage Fees

As of mid-June, yard utilisation surpassed 95% (up from about 80% in 1Q25), driven by ongoing congestion amid geopolitical tensions and supply chain disruptions. The significant hike in storage charges, effective June 15, 2025, is designed to:

• Discourage exporters from using port facilities as long-term storage for idle containers.
• Improve turnaround times and overall yard efficiency.
• Provide additional revenue streams to counteract rising costs from yard inefficiencies.

Notably, current earnings forecasts have not yet factored in potential upside from increased storage charges, suggesting possible further improvement to financial performance.

Volume Outlook and Execution Risks

Westports’ container growth forecast remains at 2% for FY25E–27E, supported by steady intra-Asia trade flows. Key risks include:

• Weaker global trade outlook.
• Prolonged geopolitical tensions impacting transshipment flows.
• Extended yard congestion.
• Delayed pass-through of tariff increases, especially for transshipment under fixed contracts.
• Potential capex overruns or delays in CT10 expansion, which could weigh on long-term growth.

Financial Performance and Revised Forecasts

The tariff increases are expected to have a gradual impact on revenue due to the structure of customer contracts (typically two to three years). Gateway containers are billed at gazetted tariffs but may be subject to volume rebates, while transshipment contracts are usually negotiated long-term at rates below gazetted tariffs.

• For FY25E: Assumes 15% gateway tariff increase from July 1, 2025, and 10% for transshipment, reflecting slower pass-through.
• FY26E: Further 10% increase in both gateway and transshipment tariffs from January 1, 2026.
• FY27E: 5% gateway tariff increase from July 1 and another 10% for transshipment, with higher lease obligations factored in.

Beyond FY27E, stronger volume growth is expected as new terminal capacity comes online, offset by higher depreciation and finance costs from CT10 operations. The effective tax rate is revised down to 18% from FY28 onwards to account for potential tax incentives related to port infrastructure investment.

Summary of Key Financial Metrics

Valuation: Target Price Uplift Reflects Stronger Prospects

The revised target price of MYR5.84 is based on an unchanged WACC of 8% and reflects the improved earnings outlook. The stock now trades at an implied PER of 20x, which aligns with its five-year historical average.

DCF Valuation Summary

• Target Enterprise Value: MYR20,337.7 million
• Target Market Cap: MYR19,908.0 million
• Total Shares: 3,410 million
• Target Price: MYR5.84

Operational and Financial Ratios: Robust Fundamentals

• EBITDA margin: Continues to improve, reaching 68.0% by FY27E.
• FCF yield: Ranges between 4.0% and 6.6% for FY23A–27E.
• Net Gearing: Expected to increase to 25.2% by FY27E as capex ramps up for new terminal expansions.
• Dividend Payout: Maintained at a generous 75% through the forecast horizon.
• Net interest cover: Remains healthy at around 10.5x by FY27E.

Price Performance and Shareholder Structure

• Share Price (as of report): MYR5.03
• 12-month Target Price: MYR5.84 (+20%)
• Major Shareholders:
  • Pembinaan Redzai Sdn. Bhd.: 42.4%
  • South Port Investment Holdings Ltd.: 23.5%
  • Employees Provident Fund: 9.2%
• Free float: 21.1%
• Market Capitalisation: MYR17.2 billion (USD4.0B)

Recent price performance shows a strong uptrend:

• 1-month absolute return: 10% (relative to index: 13%)
• 3-month absolute return: 9% (relative: 9%)
• 12-month absolute return: 23% (relative: 30%)

Risks to Outlook

Despite a robust earnings and margin outlook, several risks should be monitored:

• Sudden changes in global trading routes or a significant global economic slowdown could adversely impact container throughput and earnings.
• Delays in implementing tariff hikes or a surge in operational costs could dampen future earnings growth.
• Execution risks related to contract renegotiations, capex management, and yard congestion remain material threats.

Conclusion: A Stronger Westports Positioned for Growth

Westports Holdings stands at a pivotal juncture, with newly gazetted tariff hikes and increased storage charges set to drive revenue, improve margins, and support higher earnings, even amid a challenging macro environment. While near-term volume growth may be modest, resilient intra-Asia trade and ongoing capacity expansion underpin a solid long-term outlook. The stock’s valuation, healthy financials, and generous dividends make it an attractive proposition for investors seeking exposure to Southeast Asia’s logistics and port infrastructure growth story.

About Maybank Investment Bank Berhad

Maybank Investment Bank Berhad is a leading provider of investment research and advisory services in Malaysia and the wider ASEAN region. The research team offers in-depth equity analysis, macroeconomic commentary, and sector-specific insights, supporting investors with timely and actionable intelligence.

Contact Information

For further information, contact Maybank Investment Bank Berhad, 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur, Malaysia. Tel: (603) 2059 1888

Disclaimer

This article is for informational purposes only and should not be considered as financial advice. Investors are advised to conduct their own research and consult with financial professionals before making investment decisions.