Westports Holdings Bhd has bagged The Edge Billion Ringgit Club award for the highest returns to shareholders over three years in the transportation and logistics sector, in which its peers are MISC Bhd, Malaysia Airports Holdings Bhd and MMC Corp Bhd.
For an investor who invested in Westports three years ago on March 31, 2018, his return grew at a compound annual growth rate of 9% during the three-year period ended March 31, 2021.
It is a commendable achievement, given how the port operator also took a hit from the pandemic, as various lockdowns across the world caused supply disruptions and congested ports.
While some of its peers’ share prices have yet to bounce back to pre-pandemic levels, Westports, however, has gained 28.4% in the three-year period. Its stock price climbed from RM3.20 to RM4.11.
The port operator’s resilient earnings appeared to be the main fuel that helped sustain its share price despite the uncertainties brought by the Covid-19 pandemic.
Westports’ net profit was on the rise, reaching a record high in FY2020 after an earnings contraction in the financial year ended Dec 31, 2018 (FY2018).
The group posted net profit of RM533.7 million in FY2018, down from RM651.5 million in FY2017, as revenue dipped below RM2 billion to RM1.614 billion. Its earnings returned to the growth path with net profit of RM590.89 million in FY2019 and RM654.48 million in FY2020 — the highest level recorded so far.
In FY2018, container throughput stood at 9.5 million twenty-foot equivalent units (TEUs), improving to 10.9 million TEUs in FY2019 before declining slightly to 10.5 million TEUs in FY2020.
It is worth noting that Westports has declared dividends every year since being listed in 2013.
The port operator adopts a dividend policy payout ratio of 75%. However, in FY2020, it had a lower dividend payout ratio of 60%, as it decided to be in cash conservation mode in preparation for the Westports container terminal expansion.
Between FY2018 and FY2020, shareholders have been rewarded with a total dividend of 36.22 sen per share. It declared a dividend per share of 11.7 sen in FY2018, 13 sen in FY2019 and 11.52 sen in FY2020.
Nevertheless, the lower payout is temporary, as the company plans to revert to its 75% payout ratio in the coming financial year.
For the nine-month period ended Sept 30, 2021, Westports recorded revenue of RM1.5 billion, a 9% improvement compared with a year ago. Its net profit also grew to RM585.35 million, from RM490.99 million in the previous year. The improved earnings was contributed by the growth in container revenue.
Notably, Westports has been affected by ongoing disruptions in the supply chain in the second half of 2021. In a report, AmInvestment Research says the disruption has impacted its efficiency.
“This pile-up of containers was caused by the reintroduction of movement restrictions in Malaysia as well as other countries in Asia on rising Covid-19 infections, and the ripple effect from the port congestion in some countries including Bangladesh and Vietnam,” says the research house.
AmInvestment Research believes that the throughput of seaports, including for Westports, will continue to grow in 2021 as global trade recovery gains further momentum, backed by the reopening of economies, businesses and borders.
Westports is expecting to see a single-digit throughput growth in 2021.
According to Hong Leong Investment Bank Research, the current yard utilisation is at 95% to 99%, which has caused a bottleneck at the port.
“Management expects the supply chain disruption to likely linger for at least one to two years as some countries may still impose lockdowns if resurgence of cases happens,” it says.