KUALA LUMPUR: Westports Holdings Bhd has allocated RM500mil capital expenditure (capex) for this year, of which RM400mil would be used for its Container Terminal 8 (CT8) phase one construction.
The company commenced the development of CT8 in January and would complete it in mid-2017. CT8 involved a total investment of RM1bil which is going to increase Westports handling capacity to 13.5 million twenty-foot equivalent units (TEUs) from 11 million TEUs presently.
Westports chief executive officer Ruben Emir Gnanalingam said the capex for this year would be funded via internally-generated funds and that the company had no plans to raise any debt this year.
“We have no plans to raise any debt this year, probably next year we will do it to fund the CT8 development,” he told reporters after the group’s AGM yesterday.
Notably, Westports has close to RM1bil left from its RM2bil sukuk programme that was available for issuance.
Ruben said the Government had declined the company’s appeal to extend its investment tax allowance (ITA).
This would see Westports paying higher tax rate of about 24% this year compared to the 11.5% tax rate it enjoyed last year due to ITA from high capex.
The higher tax rate would have an impact on Westports’ bottom line, however Ruben believes that the impact may be mitigated by lower fuel prices.
Westports is also waiting for the Government’s decision on the container handling tariff hike at Port Klang. Port Klang is the world’s 12th largest port by volume.
According to a CIMB Research report, while Westports had asked for a hike of 50%, it believed that a tariff hike of 30% is highly possible.
Ruben said the tariff hike was “something that needs to happen” because the last revision was made 12 years ago.
“We would remain competitive with any tariff hike because our current rate is the lowest in the region.
“Without which it is not sustainable for the long term because our cost would continue to increase,” he said.
However, the timing for the tariff hike approval was uncertain.
Ruben estimated a 5% to 10% increase in container growth this year from 8.4 million TEUs last year.
“We are expecting to handle more than nine million TEUs this year,” he said.
He noted that the growth for this year would be supported by the Ocean Three Alliance (O3) operated by CMA CGM, CSCL and UASC as well as from Asean countries.
According to analysts, the O3 should be in full swing in the second half of this year, which is estimated to contribute 500,000 additional containers to the port yearly.
Westports had a market share of 76% in Port Klang and 37% for the whole country last year.
In 2014, Westports paid 11.25 sen dividend per share, which is 75% of its payout ratio. This is equivalent to a dividend yield of 3.2%.
“We want to maintain this payout ratio moving forward,” Ruben said.
Shares of Westports closed two sen higher to RM4.30 with 5.9 million shares done yesterday.
