KUALA LUMPUR (Jan 24): Westports Holdings Bhd (KL:WPRTS) is set to make single-digit earnings growth this year, following better-than-expected growth in 2024, limiting further upside to its share price, analysts said.
Core net profit of RM893 million, which strips out extraordinary items, exceeded the consensus estimate for the financial year ended Dec 31, 2024 by about 5% and investors cheered the results, pushing shares of the country’s biggest port operator up slightly on Friday.
“We anticipate continued earnings growth, on the back of sustained strong gateway volume” from strong foreign direct investment flows, gradual recovery in transhipment volume, and an anticipated tariff hike in 2025, said Hong Leong Investment Bank.
The house maintained its ‘buy’ call on the stock, noting that Westports is guiding a “conservative” mid-single digit growth for 2025.
The consensus now calls for Westports to make a net income of RM892 million for 2025.
Shares of Westports have surged more than 30% and outperformed the broader market in 2024, though analysts appear divided on whether investors should continue to buy the stock.
There are now 11 ‘buy’, eight ‘hold’, and no ‘sell’ calls, and the average target price is RM4.78, according to analysts tracked by Bloomberg. That suggests a potential return of only 5% in the next 12 months from the last price of RM4.54.
The rally in 2024 was also partly due to optimism for a significant increase in container tariffs. The Port Klang Authority has proposed a 30% container tariff hike, according to the Association of Malaysian Hauliers in a social media post in September.
“We expect this to take effect this year,” CGS International said, “although, referencing the last tariff hike 10 years ago, we think that the hike may be split into two tranches three years apart.”
The research house has a ‘hold’ call on the stock, flagging upside risk if the increases are larger and take place faster than expected. However, the house also cautioned that Westports faces “big uncertainty” from the effect of any potential US import tariffs.
On one hand, heavy US tariffs on Chinese imports may accelerate the trade diversion, and push the Chinese to export more to Malaysia, which could benefit Westports’ container volume, CGS International said.
On the other hand, Malaysian intermediate goods exports to China could be hurt by a slowdown in Chinese exports to the US, the house said, warning that Malaysian exports could also suffer if the US imposes tariffs on Asean goods.