Despite Westports Holdings Bhd's core profit after tax (PAT) of RM230.9 million for the third quarter financial year of 2024 (3QFY24) represented 76%-77% of both MIDF Investment Bank Bhd's (MIDF Research) and consensus full-year projections, the research house maintained a NEUTRAL call on the port operator with a target price (TP) of RM4.30.

The research house noted that Westports' 3Q performance was marked by contrasting trends across its business segments.

"While gateway volume rose by 8.7% year-on-year (YoY), its transshipment volume experienced a 9.9% YoY decline due to reduced movement of empty containers.

"Notably, container revenue increased by 6.6% YoY, supported by growth in value-added services (VAS), which accounted for 24.6% of the revenue, up from 21.6% in the previous quarter," MIDF Research said in a note.

MIDF Research added that Westports' conventional revenue also demonstrated robust growth of 30.3% YoY, driven by a 22% increase in the break and dry bulk segments.

"Sequentially, its core PAT was also up 13.3% quarter-on-quarter despite a slight 1.1% dip in container volume due to a continued rise in conventional volume and the strong performance of VAS," the research house noted.

Looking ahead, Westports' management expects container volume for FY24 to end flat, reflecting subdued market conditions and shifts in transshipment congestion. This outlook aligned with MIDF Research's projected growth of 1.2% YoY.

"The company forecasts low single-digit growth in FY25, driven by strong gateway volume and a recovery in transshipment traffic, an estimated 3.3% growth," MIDF Research said.

With its discounted cashflow-derived TP of RM4.30, MIDF Research has indicated that Westports' valuation remains close to its five-year historical mean, based on a WACC of 7.2% and a growth rate of 3%.

The stock's key potential upsides include higher-than-expected tariff hikes and an upward revision in container volume forecasts from management.