KUALA LUMPUR: Tariff decisions will decide Westports Holdings Bhd's fortunes next year - US President Donald Trump's tariff policy and the government's approval for a port tariff hike.
CGS International in its note to investors today said Westports guided for muted growth for 2025 container volumes, hoping for a small year-on-year (yoy) growth in transhipment volumes with the Zim effect moving into the background.
The Zim effect refers to Malaysia's decision to turn away ships with the Israeli flag at its ports.
"Overall, we are expecting total container volume to grow 3.8 per cent in 2025 vs. +0.7 per cent in 2024. On the other hand, we are assuming a normalisation in value added services revenues in 2025 as Westports's yard is currently decongesting," it said.
CGS International said a key risk is if US president-elect Trump raises tariffs on imports from China to 60 per cent and on imports from other countries to 10-20 per cent.
"The upside risk is for trade volumes to jump ahead of the higher tariffs but the longer-term implications are uncertain. Will higher tariffs on Chinese exports accelerate the 'China+1' strategy that has so far benefitted Malaysia or, in a downside risk scenario, will these tariffs crimp US buying power such that overall global trade growth is impacted negatively?," it said in the note.
Separately, it expects the government to allow Westports to raise port tariffs next year, to fund its expansion plans.
It has pencilled in a 15 per cent hike from Sep 1, 2025.
CGS International has upgraded its all on the stock to "Hold" from "Reduce" until details of the tariff increase are available. It also attacehd a higher target price of RM4.33 a share for the stock.
The firm said Westports' third quarter 2024 core net profit of RM228 million was 12 per cent higher quarter-on-quarter (+17 per cent yoy) due to stronger operating performance and lower amortisation expense of the port infrastructure and concession assets given the extension of the port concession to 2070, from 2054 previously, effective Sep 1, 2024.
Westports share price was up one sen to RM4.39 a share earlier.