PETALING JAYA: Shipping group Westports Holdings Bhd is likely to be impacted by the Covid-19 lockdown in Shanghai.

       The company may also be affected by the ongoing geopolitical tensions from the Russia-Ukraine war which are putting a strain on global supply chains.

       “We expect to see a spillover effect on Westports, potentially negatively impacting its first half throughput volume this year, despite its yard utilisation rate easing to below 80% currently,” Hong Leong Investment Bank (HLIB) Research said in its report.

       “While we do not rule out the possibility of vessels diverting to call and discharge their containers at Westports, we believe it will be cautious not take on too many containers to avoid the reoccurrence of yard congestion,” it added.

       There is a cautious near-term outlook for Westports due to the increasing uncertainty from the global supply chain disruptions, the research house said.

       It has lowered its financial year 2022 (FY22) to FY23 earnings forecast by 3% to 6%, as it imputed lower throughput growth and raised its tax expense assumption.

       It maintained its “hold” call on the counter and the discounted cashflow derived target price is also lowered to RM4.27 from RM4.31 previously.

       It has raised its cost of equity assumption to 8.5% from 8% on the expected increase in interest rates in the near to medium term.

       Meanwhile, CGS-CIMB Research noted that the demand for value-added services, such as box storage and reefers provided by Westports may also decline in the coming quarters.

       This is because the company’s yard has decongested from a near-100% utilisation in the late fourth quarter of last year to about 80% currently.

       “We have projected a 20% drop in value added services revenue per twenty-foot equivalent unit handled for the forecast FY22.

       “Separately, the ‘Westports 2’ expansion project will be delayed as it waits for the government to sign the concession agreement, which Westports now expects to be in late-FY22 at the earliest,” CGS-CIMB Research said.

       The research house retained its “hold” call on the counter with a reduced target price of RM3.78 from RM3.88 previously based on the discounted cashflows of geared cashflows, discounted by the cost of equity at 7.9% from 7.3% previously.