Trade tariff risks likely to affect Westports

The Star

2 days ago

TA Research said it is keeping its financial year 2025 (FY25) to FY27 earnings forecast unchanged.
PETALING JAYA: Westports Holdings Bhd is likely to report a profit of between RM420mil and RM475mil for the first half of financial year 2025 (1H25).
In a note, TA Research said the projected amount accounted for 45% to 50% of its full-year forecast.
Westports will be releasing its results for the second quarter of financial year 2025 (2Q25) tomorrow.
'In general, we expect 2Q25 key operating metrics to track the trade performance of Malaysia and China during the period.
'As such, we project Westports' 2Q25 gateway and transhipment volume to be around 1.2 million to 1.25 million and 1.53 million to 1.58 million twenty-foot equivalent units, respectively, by referring to Malaysia and China's respective trade growth of 6.1% and 4.5% year-on-year in 2Q25.
'We keep our financial year 2025 (FY25) to FY27 earnings unchanged at this juncture and maintain Westports' FY25 transhipment and gateway volume growth assumptions of 3% and 2%, respectively, pending the tariff outcome soon,' it said.
TA Research was hopeful that the government would secure a favourable deal with the United States on the tariffs, although the odds appeared slim.
Should negotiations fall through, the research house said the looming 25% export tariff would significantly undermine Malaysia's trade competitiveness, putting the country at a distinct disadvantage.
'More critically, we expect tariff-inflated US imports would dampen consumer spending in the fourth quarter of this year, particularly given that many consumers likely stocked up during the 90-day tariff reprieve.'
US President Trump had indicated that all countries would face tariffs ranging from 15% to 50%.
'As such, Malaysia would be able to minimise the impact from the structural change only if the tariff is set at the 20% levels or near its peers namely Vietnam (20%), the Philippines (19%), Indonesia (19%), Japan (15%) and the European Union (15%).
'As the access to United States' high-tech chips and China's rare earth minerals and magnets would remain the key concerns of both countries and subject to export restrictions, we believe the rule of origin would also be applied to Malaysian exports as the country is one of the important transhipment hubs in the Strait of Malacca.
'In other words, higher tariffs could be imposed on goods transhipped through Malaysia like the trade deal between the United States and Vietnam, which includes a 40% tariff on transhipment.'
TA Research has downgraded its rating on Westports to a 'sell', ahead of the looming risk from the trade tariff.
However, it maintained Westports' target price at RM5.57 per share.
'As the share price has appreciated by 22% since the port tariff hike announcement, we believe the market has fully priced in the positive impact from port tariff adjustment,' according to the research house.