In Port News 20/07/2016
Source: The Star Malaysia
Maybank Investment Bank Research views the merger of Hapag-Lloyd and UASC adding uncertainties to Westports’ outlook in 2017-2018, especially with CMA CGM signalling its intention to increasingly use the Port of Singapore Authority (PSA).
The research house said on Tuesday it, however, still sees high possibility of existing volume being retained at Westports given its competitiveness.
“On a brighter note, Westports could surprise the market with a strong 2Q16 volume growth of more than 10% on-year. Maintain earnings forecasts, Hold and discounted cashflow-derived (DCF) target price of RM4.30,” it said.
Maybank Research said Hapag-Lloyd and UASC (Westports’ 2nd largest customer, accounting for c.10% of total volume) signed an agreement on Monday to merge and the exercise is expected to complete by end-2016. The merger is expected to be completed by end-2016
Until then, Hapag-Lloyd and UASC will continue to operate as standalone groups and each will also operate in its own existing alliance until March 2017. Thereafter, the merged entity will join the new “THE Alliance” and the operation is scheduled to begin in April 2017.
“Given that the Hapag-Lloyd-UASC merger will only complete in end-2016, there will not be any impact to Westports in 2016.
“As for 2017 onwards, it remains to be seen if the merged entity will: (i) move UASC’s existing transhipment volume at Westports to PSA (the bigger merger partner Hapag-Lloyd presently hubs at PSA); or (ii) adopt a dual hub strategy (uses both Westports and PSA) given Westports’ competitiveness.
“Assuming the worst case scenario (UASC’s transhipment volume is removed entirely), the container volume at Westports will fall 9% in 2017 and shave our 2017-18 EPS estimates by 9% per annum, as well as lower our DCF valuation to RM4 (-7%).
“However, considering Westports’ competitiveness, we think there is a high possibility that a bulk of the existing volume could be retained at Westports,” it said.
Source: The Star Malaysia
