KUALA LUMPUR: Westports Holdings Bhd is expected to see container throughput recover in the second half of 2026 as shipping lines adjust routes and vessels return to service amid the Iran conflict, says Hong Leong Investment Bank Bhd (HLIB).
In a research note following a site visit, HLIB said Westports maintained its full-year throughput growth target of low single digits, despite a one per cent year-on-year decline in the first half of 2026 (1H26).
"The impact of the ongoing Iran conflict appears to have normalised, with more vessels being released from the Persian Gulf and returning to service, while global liners continue to realign their schedules and routes to adapt to the evolving situation.
"Against this backdrop, container throughput is expected to recover in 2H26, with volumes likely to be stronger than in 1H26," it said.
HLIB said Westports' outlook remained positive, with recovering throughput expected to offset the anticipated normalisation of its value-added services (VAS) revenue.
VAS accounted for a record 30.7 per cent of container revenue in the second quarter (Q2) of 2026 supported by higher storage volumes and a tariff increase in January.
"To improve operational efficiency, Westports has been actively clearing long-staying containers, particularly e-waste. Consequently, we expect VAS contributions to gradually normalise by year-end," the firm said.
HLIB said improved yard occupancy of 70 to 80 per cent puts Westports in a better position to accommodate ad-hoc transhipment volumes, helping to offset the anticipated moderation in VAS contribution.
On costs, operating expenses are expected to remain stable compared to Q2, supported by Westports' two-year Green Electricity Tariff subscription, which helps hedge against fluctuations in electricity-related charges.
Diesel costs are also expected to remain stable despite a recent rebound in market prices.
HLIB said the minimum wage increase to RM2,000 in June 2027 should be manageable for Westports, as the current minimum salary for its staff is already RM1,900.
"The June 2027 minimum wage hike to RM2,000 is expected to be manageable at five per cent of total staff costs (in line with annual rise in staff costs), as the current minimum salary of its staff is already at RM1,900," it said.
Meanwhile, Westports' long-term expansion plans remain on track, with dredging and land reclamation works for its CT10 to CT13 port expansion project about 70 per cent complete.
Wharf and yard construction is expected to begin in 2027, subject to the finalisation of plans.
Capital expenditure is projected at RM700 million in 2026 before increasing to between RM1.1 billion and RM1.4 billion in 2027 and 2028 as the project enters the equipment acquisition phase.
HLIB maintained its "Buy" call on the port operator with a target price of RM7.15.
The firm said there is potential for an earnings forecast upgrade, noting that Westports' first-half results had already achieved 51.7 per cent of its full-year earnings estimate.
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