WPRTS: Port Operator Exceeds Profit Forecast on Cost Efficiencies, Analyst Upgrades Rating
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM7.40 (+21.1%) |
| Last Traded | RM6.11 |
| Recommendation |
A recent research report by TA Securities highlights that a leading port operator’s core profit for FY25 surpassed the firm’s expectations by 6.6%, aligning with consensus estimates. The strong performance was attributed to higher-than-expected revenue from marine services and rental income, coupled with notable cost efficiencies, particularly lower electricity costs. In response to the robust results and positive outlook, TA Securities has upgraded its recommendation to BUY from Hold, setting a new target price of RM7.40.
Performance Review
The port operator recorded an impressive 12.7% year-on-year (YoY) increase in FY25 core profit, reaching RM1.0bn. This growth was primarily fueled by an 11.6% rise in port revenue, driven by volume growth and strategic port tariff hikes, including a 15% increase effective June 2025. Total container throughput expanded by 3.3%, largely bolstered by a 7.4% growth in transhipment volume, which offset a 1.8% decline in gateway volume.
On a quarter-on-quarter (QoQ) basis, 4Q25 core profit grew by 6.1% to RM284mn. This was predominantly supported by the aforementioned port tariff hikes, as overall throughput growth remained marginal at 1.0%. Transhipment volume increased by 5.6% QoQ to 1.7mn TEUs, while gateway volume contracted by 4.8% to 1.2mn TEUs. For the quarter, the company proposed a second interim dividend of 11.92sen/share, bringing the total FY25 dividend to 21.85sen/share, equivalent to a 3.9% yield.
Future Outlook and Analyst View
TA Securities has raised its FY26-27 earnings projections by 6.3-10.2%, factoring in expectations for sustained higher revenue from marine services and rental segments, alongside continued lower fuel and electricity costs. Management maintains its throughput growth guidance at 0-5% for 2026, anticipating similar growth from both transhipment and gateway volumes. This guidance aligns with the port’s existing handling capacity.
The first phase of the company’s 2.0 expansion initiative is reportedly progressing smoothly, with land reclamation activities 5% ahead of schedule and the construction of wharf and yard facilities on track to commence in FY27. However, the global trade landscape remains uncertain, with potential tariff threats prevalent. The upcoming Xi-Trump meeting in April 2026 is highlighted as a critical event that will significantly influence global trade dynamics for the year.
The upgrade in recommendation from Hold to BUY by TA Securities reflects their conviction that global trade deterioration will stabilize, particularly following key geopolitical discussions. The new target price of RM7.40 is based on a Dividend Discount Model (DDM) valuation.
