Valuing Westports Holdings Berhad (KLSE:WPRTS): Is the Stock Overvalued or Undervalued?

!

Westports Holdings Berhad (KLSE:WPRTS), a cornerstone of Malaysia's maritime logistics sector, has long been a focal point for investors seeking exposure to Asia's growing trade corridors. With container throughput hitting 10.98 million TEUs in 2024-a record-and revenue surging to RM2.34 billion, the company's financials appear robust. But is the stock undervalued, as some models suggest, or overpriced amid global trade uncertainties? Let's dissect this using discounted cash flow (DCF) analysis and intrinsic value assessment.

Recent Performance: A Foundation of Growth

Westports' 2024 results were nothing short of stellar. Revenue reached RM2.34 billion, with profit after tax hitting RM898 million, driven by a 1.74% year-over-year increase in container throughput, according to Simply Wall Street. The first quarter of 2025 added further momentum, with an untaxed profit of RM233.07 million, signaling resilience in its core operations as reported in the Annual Report 2024. For Q2 2025, revenue jumped 25% year-on-year to RM691.1 million, while net income grew 14% to RM231.6 million, albeit with a slightly compressed margin of 34% due to rising expenses, according to TA Research.

The company's dominance in Intra-Asia trade-accounting for 66% of container throughput-underscores its strategic positioning. However, global macroeconomic headwinds, including the IMF's revised 1.7% trade growth forecast for 2025, cast a shadow over long-term optimism, as noted in the Simply Wall Street forecast.

DCF Inputs: Building the Case for Value

To estimate intrinsic value, we start with free cash flow (FCF). Westports generated RM1.21 billion in FCF for 2024, with Q2 2025 contributing RM362.69 million, according to TradingView. Historical FCF growth has averaged 5% annually over the past decade, but recent performance-36% growth in the last year-suggests stronger momentum (see Annual Report 2024).

Growth Assumptions (2025–2030):- Earnings and Revenue CAGR: Analysts project 6.8% and 7.6% annual growth, respectively, supported by the 2028 commissioning of the expanded CT10 terminal and phased tariff hikes, per Alpha Spread.
- Operating Margins: While the current trailing twelve-month (TTM) operating margin stands at 51.03%, margin compression is anticipated in 2025 due to higher manpower costs and global trade volatility (Simply Wall Street).
- Discount Rate: A WACC of 10% is assumed, reflecting the company's low debt levels and stable cash flow profile.

Intrinsic Value vs. Market Price

Applying a two-stage DCF model, Alpha Spread estimates Westports' intrinsic value at RM5.69 per share as of October 3, 2025, implying a 7% undervaluation relative to its market price of RM5.30 (Alpha Spread). This calculation incorporates a 3.7% perpetual growth rate for terminal value and assumes the 15% container tariff hike (effective July 2025) will boost earnings by 25% (TA Research).

However, a conflicting valuation from another model-a two-stage free cash flow to equity approach-suggests a fair value of RM3.98, indicating a 33% overvaluation, according to an analysis by Yahoo Finance. This discrepancy stems from divergent assumptions: the lower valuation discounts growth prospects, factoring in delayed tariff implementation and global trade risks.

Risks and Catalysts

Westports' valuation hinges on two critical variables:1. Tariff Hikes: A 15% increase in container handling fees, approved in July 2025, is earnings-accretive but has yet to be fully reflected in analyst models (Alpha Spread).
2. CT10 Expansion: The RM1.2 billion terminal, set to double capacity by 2028, could drive throughput growth to 8–10% annually post-commissioning (Simply Wall Street).

Conversely, risks include a slowdown in transshipment volumes (currently flat YoY) and rising operational costs. TA Research has downgraded earnings forecasts by 2.7–3.2% for 2025–2026, citing audited FY24 results (Simply Wall Street).

Conclusion: A Buy for the Patient Investor

While valuations appear split, the base-case DCF model favors Westports at current prices. The company's structural advantages-dominant market share, tariff tailwinds, and capital expenditure discipline-justify a premium. Investors should monitor Q3 2025 results for confirmation of throughput stability and the pace of tariff implementation. For those with a 5–7 year horizon, WPRTS offers compelling upside, provided global trade stabilizes.

Final Verdict: Undervalued, but with caveats.