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MARC has affirmed the AA+IS rating of port operator Westports Malaysia Sdn Bhd’s (Westports) RM800.0 million Sukuk Musyarakah Medium Term Notes (Sukuk Musyarakah MTN) and maintained the stable rating outlook. The affirmed rating is based on the company’s strong operational efficiency, sound financial profile reflected in its low gearing and strong liquidity position, and solid sponsors. These positives are tempered by the industry’s capital intensive nature and inherently cyclical growth trend that is highly correlated with the state of economy. The stable rating outlook reflects the company’s favourable cash reserves and demand-driven capital spending which will enable Westports to maintain its credit quality over the near-term notwithstanding the impact of weaker global and domestic macroeconomic environment on throughput volumes at its terminals. Greater than expected declines in throughput volumes could put Westports key financial metrics and ratings under more pressure. Westports is a private port operator in Port Klang, the main gateway for the industrialised hub of Klang Valley. The Malaysian federal government holds one special share in Westports via the Ministry of Finance Incorporated and an indirect 8.55% stake through Khanazah Nasional Berhad’s shareholding in Westports Holdings Sdn Bhd, the holding company. Other significant shareholders in the holding company are transnational port operator Hutchison Port Holdings Ltd (HPH) via South Port Investment Holdings Ltd (31.45%) and private infrastructure operator Pembinaan Redzai Sdn Bhd (42.90%). Despite the government’s modest equity holdings in Westports, MARC believes that the government would be willing to extend financial support to the port operator if and when required on account of Westports’ strategic importance in promoting trade.
Westports handled 4.31 million twenty-foot equivalent units (TEU) of shipping containers in 2007. The port’s container handling capacity had increased from 5.0 million TEU to 7.0 million TEU following the completion of new container terminal CT5 which was fully operational in the third quarter of 2008. The port’s throughput increased by 10.5% to 4.97 million TEU in 2008, following a 17.7% prior-year growth in throughput volume. Westports’ throughput volume which has fallen since the fourth quarter of 2008 showed signs of pick-up at the end of March 2009. Westports projects throughput of 4.3 million TEUs in 2009, a decline of 15% from its high of nearly five million TEUs in 2008. The port continues to maintain productivity at “Fastport” standards of average 35 moves per-hour-per-crane-per-ship and is recognised among the top five productive ports in the world. The port’s strong operational performance derives from its experienced management team, technological transfer from Hong Kong-based HPH, and long-standing relationships with global shipping liners. HPH, a subsidiary of the globally diversified Hutchison Whampoa Limited, handled a combined throughput of 66.3 million TEU worldwide in 2007 through its interests in 50 ports around the world.
Westports reported double-digit year-on-year growth in revenue and pre-tax profit as at audited financial year ended December 31, 2007 (FY2007). Revenue reached RM827.1 million (FY2006: RM741.6 million) while pre-tax profit was at RM311.5 million (FY2006: RM229.9 million). The growth momentum continued in 2008 with revenue and pre-tax profit at RM984.28 million and RM372.34 million respectively. With stable costs, operating profit margin was maintained at 40.0%. Westports’ fairly strong capitalisation, as indicated by its debt-to-equity ratio which has been maintained below 1.0 times since FY2006, has been further bolstered by its robust internal capital generation. Westports’ operating cashflow remained strong in FY2008 at RM594.4 million while free cash balances stood at RM72.5 million as at year-end 2008. Westports bought back and retired the total RM100.0 million of its outstanding Floating Rate Notes by November 2008. Approximately RM445.0 million of its outstanding Sukuk Musyarakah MTN as at March 18, 2009 will mature between March 2011 and March 2013. The unutilised balance under the Sukuk Musyarakah MTN Programme stands at RM355.0 million as of the same date.
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