Port charges hike, container volume growth to boost Westports' Q3 earnings
In a note, the firm said the anticipated year-on-year (YoY) growth in average revenue per twenty-foot equivalent unit (ARPT), coupled with sequentially stronger container volumes in 2Q25, could serve as potential share price re-rating catalysts for Westports.
"The 15 per cent rise in port charges from July 15 will also boost 3Q25 results, which is why we reiterate 'Add' on Westports," it said.
CGS has raised its target price to RM6.41, citing expectations of stronger storage income amid sustained high yard utilisation.
It also noted that Westports' yard utilisation remained elevated at 90 per cent or higher during the first half of 2025 (1H25). This was partly due to a government crackdown on illegal e-waste and metal waste imports since 2024.
The stricter customs checks have caused an estimated 5,000 to 6,000 containers to remain stranded at Westports' yard, some for up to 60 days. These containers are expected to either be cleared for entry into Malaysia or re-exported to their ports of origin.
If importers cannot be identified, Westports will recover storage charges from the shipping lines.
CGS said this backlog contributed to a 4.3 per cent YoY increase in ARPT in 1Q25 and expects the positive trajectory to have continued into 2Q25.
Meanwhile, CGS also believes that container volume growth in 2Q25 likely exceeded the modest 0.6 per cent YoY growth seen in 1Q25.
This was driven by the launch of the Gemini Cooperation shipping alliance on Feb 1, which led to changes in shipping routes and cargo flows that boosted Westports' transshipment volumes.
In April, Evergreen shifted two of its container services from Port of Tanjung Pelepas to Westports, contributing further to sustained volume gains.
On the impact of the US-China trade war, CGS said shipping lines had initially diverted vessels to alternative routes, but restored capacity between the two countries as US demand rebounded after mid-May.
These abrupt changes in vessel deployment contributed to higher transshipment activity at Port Klang and Singapore, according to Westports.
Despite the positive developments, CGS cautioned that downside risks remain for the group.
These include the threat of a global recession that could weigh on container trade volumes, and the possibility of the US reintroducing punitive trade tariffs on global economies, excluding China, once the current 90-day reprieve ends on July 8.
CGS has lowered its cost of equity assumption for Westports to 8.2 per cent from 9.4 per cent, citing a lower risk profile for the group following improved clarity on future port charges.
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