Highlight Westports climbs on scrapping of P3 alliance

by **Cals** Fri 20 Jun 2014, 01:44

Highlight Westports climbs on scrapping of P3 alliance

Business & Markets 2014

Written by Kang Siew Li & Adrian Wong of theedgemalaysia.com

Thursday, 19 June 2014 08:33

KUALA LUMPUR: Westports Holdings Bhd shares rose to as high as RM2.79 yesterday, before easing to close four sen or 1.49% higher at RM2.73, following news that the P3 shipping alliance proposed by the world’s three biggest container shipping companies has been scrapped.

At yesterday’s closing price, Westports’ market capitalisation stood at RM9.31 billion.

P3 is an operational sharing agreement originally proposed by CMA CGM, Maersk Line and Mediterranean Shipping Co in June 2013, but it has been taking a long time to materialise because it has to gain regulatory approvals from Europe, the US and China. On Tuesday, China’s Ministry of Commerce announced that it had not approved the P3 network on the grounds that it “restricts competition”, and the three partners were subsequently reported as saying that they had agreed to scrap the alliance.

Shares in Westports tumbled briefly in October last year after the P3 alliance announced its shipping routes, which had raised concerns that CMA-CGM — Westports’ biggest customer — may move its transshipment hub from Westports to Port of Tanjung Pelepas (PTP) in Johor, which could negatively impact its revenue. PTP is Maersk’s hub in Southeast Asia.

Westports chief executive officer Ruben Emir Gnanalingam told The Edge Financial Daily yesterday that the latest decision in some ways would not change anything because he did not expect the route realignment of the P3 shipping alliance to have any material impact on Westports.

“We have always maintained that we never thought the P3 would have a large impact on our [container] volume and as such, we do not feel that we would be largely impacted by the P3 members’ decision not to proceed either,” he said via email.

“At this juncture, we would still maintain that we expect volume to grow at between 5% and 10% for 2014,” Ruben said, adding that CMA CGM has been its largest client for some time now and “we have always worked very closely with them”.

Westports recorded a total volume of 7.47 million 20-foot equivalent units (TEUs) last year, an 8% increase from 2012.

AmResearch Sdn Bhd analyst Thomas Soon sees further increases in Westports’ container volume this year following the latest news.

“This [scrapping of the P3 shipping alliance] should be good news for Westports,” he told The Edge Financial Daily when contacted.

AmResearch had forecast Westports’ container volume to grow to 7.9 million TEUs this year, which took into account the potential impact of the P3 alliance members rerouting their Asia-Europe/Mediterranean port calls by the second half of this year.

“We had initially forecast full-year growth in container throughput of 5%, but now we may be looking at 6% to 8% growth for the year,” said Soon.

Westports’ share price has surpassed AmResearch’s fair value of RM2.69 per share and, as such, Soon said he will be revising his numbers to reflect the latest development.

This article first appeared in The Edge Financial Daily, on June 19, 2014.