Westports Holdings is set to be a key beneficiary of the recent regional comprehensive economic partnership (RCEP) agreement and Donald Trump’s imminent departure from the White House, say analysts.
RCEP covers the 10 member states of the Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia and New Zealand which together account for around 30% of the global population, global gross domestic product and global trade.
“The signing of RCEP agreement was a big step forward for the Asean region and Malaysia is set to benefit from it as a member country,” said Tan Kam Meng of TA Securities
“Westports, which has strong presence in handling intra-Asia cargoes, would benefit too. Note that the intra-Asia trade lane contributes up to 62% of Westports’ total throughput in the year-to-date.”
Tan added that with US president Donald Trump’s tariff policy “almost behind us”, he is “less pessimistic” on the global trade arena.
“Also, in the advent of Covid-19 vaccines, the US economy is poised for recovery, which would bode well for international trade.”
Tam has upgraded Westports' shares to a ‘buy’ from his earlier ‘sell’ recommendation on the improving global trade situation.
“We raise our FY20-22 earnings projections by 19.5-20% after revising our FY20/21/22 throughput assumptions to 10.6m/10.9m/11.6m-teu from 9.9m/10.2m/10.8mteu previously to take into account the relatively strong throughput growth in the third quarter and management’s 2021 throughput guidance,” he said.
Westports group managing director Ruben Emir Gnanalingam said that Westports container volume declined by 4% for the first nine months of 2020 despite a pandemic affected year because the rebound in the third quarter, after many countries emerged from the various forms of lockdown arrangements or movement restrictions, had cushioned the decline during the first six months of the year.
“As we enter into the fourth quarter of 2020, many regions and cities have reimposed various forms of lockdown again,” he said.
“However, we cautiously expect a less adverse impact from the latest lockdown, compared to the second quarter of 2020, as societies and economies adjust to these movement restrictions”.
On Monday Fearnley Securities said in a note that the container market was gowing from strength to strength with the Shanghai Containerized Freight Index (SCFI) gaining another 6% last week with the China Container Freight Index (CCFI) following suit with 5% for the week.
“Transpacific rates continue a flattish note with Asia-Europe the real driver of the indices, gaining 25% on average,” the Oslo-based analysts said.
Of the major routes, the Fearnley Securities said Asia-Europe had now overtaken transpacific in terms of year-to-date year-on-year gains, standing at a “staggering 188% versus 126%” on the transpacific.
Separately, Westports Holdings said it had achieved a new container volume record by handling 23,183-teu on a single vessel in 46 hours of operation.
The record was carried out aboard the 20,776-teu CMA CGM Antoine De Saint Exupery (built 2018) at Westports in Malaysia between the 4th and 6th November 2020 during her regular eastbound FAL 1 service, which connects Asia to Northern Europe.
