Congestion at ports, a shortage of shipping containers and significant shipment delays were common as the Covid-19 pandemic disrupted global supply chains, but Westports Holdings Bhd’s financials have held up well the past three financial years.
Despite Port Klang and parts of the Klang Valley being incapacitated by a sudden flood in December 2021, Westports — which together with Northport makes up Port Klang — reported a 23% year-on-year (y-o-y) jump in profit after tax (PAT) to RM808.2 million in the financial year ended Dec 31, 2021 (FY2021), from RM654.5 million in FY2020, as revenue climbed 2% y-o-y to RM2.02 billion in FY2021. It made a PAT of RM590.9 million in FY2019 and RM533.5 million in FY2018.
According to The Edge Billion Ringgit Club (BRC) methodology, Westports’ PAT grew at a risk-weighted compound annual growth rate (CAGR) of 14.9% in the last three years — the highest among peers in the transportation and logistics sector.
“Given the external economic conditions and supply chain challenges, the company achieved a good level of profitability,” Datuk Ruben Emir Gnanalingam Abdullah, group managing director of Westports, said when announcing its results for FY2021.
However, Ruben conceded that a one-off insurance recovery amounting to RM73 million due to damaged quay cranes and a wharf incident two years ago, had amplified its bottom line in FY2021. Excluding the exceptional item, the PAT for the year would have been RM751 million.
Still, higher PAT helped lift Westports’ weighted return on equity (ROE) over three years (2019-2021) to 25.6%, the best return among its peers in its sector. Its adjusted ROE grew from 23.8% in FY2019 to 24.3% in FY2020 and 27.1% in FY2021.
Westports is no stranger to the BRC awards. The regular dividend payer was named a winner for the highest returns to shareholders over three years in the transportation and logistics sector in 2021. It declared a dividend of 15 sen per share in FY2021 — the highest payment since FY2017 when it declared 14.3 sen — compared with 11.5 sen in FY2020, 13 sen in FY2019 and 11.7 sen in FY2018. Westports has implemented a dividend payout ratio of 75% on its PAT since its listing in 2013, with the exception of 2020 when the ratio was temporarily reduced to 60% due to prudent Covid-19 precautionary measures.
This year, Westports takes home two of three awards in the same sector — highest weighted ROE and highest risk-weighted PAT growth over three years.
Shares in Westports are tightly held by founder and executive chairman Tan Sri G Gnanalingam via private investment vehicle Pembinaan Redzai Sdn Bhd, with a 42.42% stake. Other substantial shareholders include Hong Kong’s CK Hutchison Holdings Ltd via South Port Investment Holdings Ltd (23.55%), the Employees Provident Fund (8.63%) and Kumpulan Wang Persaraan (Diperbadankan) (6.92%). In 2017, Gnanalingam was named Value Creator: Most Outstanding CEO by the BRC for his visionary leadership excellence in transforming Westports into Port Klang’s leading terminal operator.
In the immediate future, Westports is expected to face headwinds from the ongoing supply chain disruption, soaring inflation, China’s zero-Covid policy, the Russia-Ukraine war and rising fuel costs. “The fast-evolving external backdrop makes it increasingly more challenging to maintain an identical container throughput volume in the current year,” Ruben said when announcing Westports’ 1HFY2022 results on July 28.
Westports’ container throughput slipped 1% to 10.4 million TEUs (20-foot equivalent units) in 2021, from 10.5 million TEUs in 2020. It handled a record 10.86 million TEUs in 2019. In a July 28 report, CGS-CIMB Research analyst Raymond Yap raised his 2022 container volume assumption for Westports to 9.97 million TEUs, up from an earlier projection of 9.86 million TEUs, as he thinks the 2HFY2022 gateway volume may grow y-o-y since the 2HFY2021 gateway volume was suppressed by the mid-2021 Covid-19 lockdown in Malaysia. However, the 2022 container volume assumption is still 4.1% y-o-y lower than that in 2021.
In a July 29 note, UOB Kay Hian analyst Kong Ho Meng says he expects Westports to post slightly weaker 2HFY2022 earnings due to a decline in value-added services income and an upside risk to its fuel costs forecasts of RM142 million and RM132 million (19% and 16% of cost of goods sold mix) for 2022 and 2023 respectively, despite the recent correction in oil prices.
In 1HFY2022, Westports recorded a 19% lower PAT of RM314.15 million from RM386.29 million a year ago, on higher operational costs predominantly due to higher fuel costs as the group purchases diesel at unsubsidised prices.
Whether Westports does better than expected, the company has demonstrated its ability to deliver amid tough times.