Broker: UOB Kay Hian
Date of Report: Monday, 04 August 2025

Westports Holdings Bhd: Tariff Hike and Operational Efficiency Drive Earnings Surprise in 2Q25

Overview: Strong Results and Upgraded Outlook for Westports Holdings

Westports Holdings Bhd (WPRTS MK), Malaysia’s premier container port operator based at Port Klang, delivered robust financial results in 2Q25, beating expectations with impressive EBITDA margins and a positive earnings outlook. A recent port tariff hike and optimized operating expenses set the stage for even stronger performance in the second half of the year. UOB Kay Hian maintains a HOLD rating, with a revised target price of RM5.55, reflecting a fair risk-reward profile amidst evolving industry dynamics.

Company Snapshot

• Share Price: RM5.59
• Target Price: RM5.55 (previous RM4.40)
• Market Cap: RM19,062m (US\$4,495m)
• Shares Issued: 3,410m
• Major Shareholders: Gnanalingam Family (45.5%), EPF (7.1%)
• Sector: Industrials

Westports provides integrated container-handling services and value-added services (VAS) such as storage, reefer, container freight, and removal at Malaysia’s busiest port.

2Q25 Financial Highlights: Margin Expansion and Tariff Implementation

Westports posted a set of results that outperformed internal projections, driven by:

• Consistently improving EBITDA margin (1H25: 64.6% vs 1H24: 62%) sustained by optimal cost structure.
• Implementation of a 30% port tariff hike, with the first 15% increment effective from 15 July 2025. The hike applies fully to the gateway business, which accounts for 43% of volume.
• Transshipment volume rebound in 2Q25, benefiting from a temporary tariff holiday and supporting management’s low single-digit volume growth guidance for FY25.

Key 2Q25 Results (RMm):

Operational Trends: Volume Growth and Value-Added Services

• Container Volume: 2Q25/1H25 saw 6%/3% YOY volume growth, driven by a transshipment recovery as empty containers were repositioned to the Far East to capitalize on a 90-day tariff holiday.
• Gateway TEUs: After surging from a 3.6-3.9m TEU base (pre-2022) to 4.91m TEUs in 2024, stricter regulatory enforcement on e-waste and illegal cargoes (e.g., scrap iron) reduced “unsustainable” volumes but improved compliance and long-term sustainability.
• Value-Added Services (VAS): VAS ratio climbed to 23% in 2Q25 (from 22% a year ago), with income rising to RM118m due to extended storage needs. Regulatory actions included inspection of 179 containers, with 68% confirmed as e-waste.

Port Congestion and Storage Charge Reforms

• Port Klang’s storage charges for empty containers were increased from RM4/TEU (unchanged since 1966) to RM12/TEU, aiming to alleviate yard congestion (which hit a critical 95% utilization in June 2025, easing to 88% in July).
• Overdue stored cargoes are being re-exported, and the cost impact on goods is minimal—raising handling charges by just 0.45 sen per kilogram for a 20-foot container with 20 tonnes of cargo.

Sustainable Gateway Cargoes and Strategic Growth Initiatives

Westports is focused on capturing “sustainable” gateway cargo volumes, leveraging growth from established customers such as paper recycling mills, regional distribution centers (IKEA, GMA Garnet, Stellantis), and the upcoming RM250 million Nestle logistics hub (operational in 2026). The Port Klang Free Zone (PKFZ) is expanding, with a 10-year masterplan to enhance throughput, value-added services, and digitalization.

Upgraded Earnings Forecasts and Key Financials

• 2025-2027F earnings upgraded by 17%/19%/25%, aligning volume assumptions with management’s guidance (YTD volume up 4% as of July 2025).
• Tariff hikes incorporated, though 2025F container yield is projected to remain flat YOY, assuming normalization of VAS and a slight taper in high-yield gateway volume.
• EBITDA margins are forecasted at 68%, reflecting sustained high VAS and efficient opex, particularly on fuel costs.

Key Financial Table:

Valuation and Recommendation: HOLD, Target Price RM5.55

• DCF-based target price revised to RM5.55 (from RM4.40), reflecting a 19x 2025F PE and 12x EV/EBITDA, with valuation horizon extended to 2070.
• Westports’ defensive position is underpinned by Malaysia’s 19% reciprocal tariff from the US, port tariff hikes, MMC Ports IPO, and the ongoing sale of CK Hutchison’s global port assets (including its stake in WPRTS), which was valued at a premium 13.5x EV/EBITDA versus industry average of 8-12x.

Environmental, Social, and Governance (ESG) Commitments

• Environmental:
  • Refined targets to achieve Scope 1 Net Zero Carbon Emissions by 2050.
  • Scope 2 emissions reduction depends on equipment electrification and grid improvements.
  • Safety initiatives have reduced the number of reported incidents (791 in 2023 vs 699 in 2022).
• Social:
  • Board diversity: 50% female representation as of 2023.
  • Social investments totaled RM5.6m (2021), RM3.0m (2022), and RM1.6m (2023).
• Governance:
  • 6 out of 10 board members are independent, with family representation maintained.

Forward Guidance and Key Metrics

Westports expects continued growth in sustainable gateway cargo and value-added services, supported by regulatory clarity and expansion projects such as the PKFZ 2.0 Masterplan. Management remains vigilant on volume composition, earnings sustainability, and cost discipline.
Container Revenue, Volume, and Yield Projections:

Conclusion

Westports Holdings Bhd has delivered a solid first half in 2025, with margin expansion, tariff-driven growth, and resilient operating metrics. Upward earnings revisions and strong volume momentum are offset by a balanced risk-reward profile at current valuations. Investors should monitor ongoing regulatory, expansion, and industry developments as Westports continues to consolidate its leading position in Malaysia’s port sector.