PETALING JAYA: The Middle East conflict is emerging as a headwind for global trade and port operators, including Westports Holdings Bhd, says BIMB Securities Research.
Furthermore, the brokerage cited that traffic flow in both Europe and the Middle East is at risk, leading to a surge in fuel costs with full margin absorption, given no pass-through mechanism.
BIMB Research also described the construction of a third port in Carey Island, Selangor, as a long-dated risk, with no earnings impact expected as “development would likely take eight to 10 years at best”.
Hence, the brokerage said it has cut Westports’ financial year 2026 (FY26) earnings forecast by 5% to reflect higher fuel costs, with further downside if the conflict prolongs and energy prices rise further.
“We also expect a temporary dip in West-East traffic to show in the second quarter of FY26 as vessels reroute via Africa.
“Earnings visibility remains highly uncertain, given the strategic importance of the Strait of Hormuz to global seaborne trade and the lack of viable bypass routes,” BIMB Research pointed out.
It has maintained a “hold” call on Westports for its dividend yield, though earnings visibility –historically a key strength for the company – has weakened.
BIMB Research noted that investors seeking transport exposure with full fuel cost pass-through may consider Perak Transit Bhd, Shin Yang Group Bhd and Orkim Bhd.
Following its 5% FY26 earnings cut on Westports, the brokerage said it lowered its FY26 dividend per share to 25.7 sen from 27 sen.
Based on an exit dividend yield of 4.5%, it lowered the stock’s target price to RM5.75 from RM6 previously.