New alliance will use Westports as its hub for this region.
This positive newsflow is a fresh catalyst to the stock.
Maintain BUY with a higher DCF-derived TP of MYR3.30.
According to CMA CGM, the alliance would not need regulatory approval from China or the European Union as the partners would have less than 30% market share on Asia-Europe (est. 20%) and Asia-Pacific routes (est. 13%). However, it would still need approval from the U.S. Federal Maritime Commission. CMA CGM also added that the launch of the alliance could be as soon as early-Dec 2014.
Nevertheless, we have raised our DCF-derived TP to MYR3.30 (+16%) as we lower our beta to 0.70x (from 0.85x) reflecting increasing stability in operations. The 0.70x also represent the average beta of Westports, NCB and HPHT (from just NCB and HPHT). Our new TP implies FY15 PER of 22x for Westports, still below Philippines’ ICT’s (ICT PM, Not Rated) 26x.
Source: Maybank Research - 11 Sep 2014
This positive newsflow is a fresh catalyst to the stock.
Maintain BUY with a higher DCF-derived TP of MYR3.30.
What’s New
CMA CGM has proposed to form a route-sharing alliance with China Shipping and United Arab Shipping (UASC), to be named Ocean Three. The new alliance is led by CMA CGM and Westports will be the dedicated hub in South East Asia (SEA). In total, there will be 17 weekly loops covering East-West routes and out of which, 10 loops will call at Westports.According to CMA CGM, the alliance would not need regulatory approval from China or the European Union as the partners would have less than 30% market share on Asia-Europe (est. 20%) and Asia-Pacific routes (est. 13%). However, it would still need approval from the U.S. Federal Maritime Commission. CMA CGM also added that the launch of the alliance could be as soon as early-Dec 2014.
What’s Our View
The 3 partners are Westports’ key hub customers, accounting for approximately 50% of its total volume and about half of it could be related to Ocean Three. We think there could still be incremental volume from this alliance as it strives for a bigger market share and plans for extensive feeder network in SEA (to increase connectivity to Westports). We maintain our volume growth assumptions of 9% and 8% for FY15-16 respectively, as it is still too early to gauge the incremental volume from the Ocean Three.Nevertheless, we have raised our DCF-derived TP to MYR3.30 (+16%) as we lower our beta to 0.70x (from 0.85x) reflecting increasing stability in operations. The 0.70x also represent the average beta of Westports, NCB and HPHT (from just NCB and HPHT). Our new TP implies FY15 PER of 22x for Westports, still below Philippines’ ICT’s (ICT PM, Not Rated) 26x.
Source: Maybank Research - 11 Sep 2014
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