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Westport 2's transshipments based on sound capacity expansion

MALAYSIA's Westport 2 expansion plan is expected to increase the por's capacity by 50 per cent to 28 million TEU per annum by 2040, say investment bank analysts, reports Kuala Lumpur's Malaysian Reserve

04 October 2020 - 19:00

MALAYSIA's Westport 2 expansion plan is expected to increase the por's capacity by 50 per cent to 28 million TEU per annum by 2040, say investment bank analysts, reports Kuala Lumpur's Malaysian Reserve.

MIDF Amanah Investment Bank (MIDF Research) said the expansion would allow Westports to compete more effectively for transshipment volumes against Ports of Singapore, which would raise its capacity from around 40 million TEU to 65 million TEU by 2040.



The research firm downgraded its call on Westports to 'neutral' from 'buy' previously as it believed that Westports is trading at its fair valuation range as the price is trading at 20.6 times.



'We continue to view Westports positively due to lower transshipment tariffs among its peers such as Port of Tanjung Pelepas and Port of Singapore even after taking into account the second phase of tariff hike in March 2019,' said MIDF Amanah report.



'The extension of the Ocean Alliance to 10 years (initially five years) until 2027 will mitigate the effects from the reshuffling of alliances profoundly seen in the financial year 2017 (FY17),' it noted.



The contribution from intra-Asia and Asia-Europe trade lanes may face temporary downward pressure from the coronavirus for FY20.



'Risks to our call include prolonged coronavirus outbreak and any abrupt downside revision to port tariffs,' the researchers said.



The port operator also announced that it has received an approval letter from the Economic Planning Unit to proceed with the proposed land acquisition of Marina Land from Pembinaan Redzai Sdn for a cash consideration of MYR394 million (US$95.4 million).



'The Marina Land will complement the 154.2 acres (62.4ha) of land previously acquired by Westports in 2018 for MYR116.2 million, as part of the Westports 2 expansion,' MIDF Research noted.


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