Billionaire May Let Clients Invest in Malaysian Terminals

Malaysian billionaire G. Gnanalingam is open to shipping-line clients investing in Westports Holdings Bhd.’s terminals to keep business as it expands port capacity.

“We won’t sell equity in the port but will welcome joint-venture terminals,” Westports founder and Chairman Gnanalingam, 69, said in an interview in Kuala Lumpur yesterday. “The advantage is that the customer will stay.”

Westports operates six container terminals at Malaysia’s Port Klang and plans to spend about 2 billion ringgit ($619 million) to build three more to double its capacity, Gnanalingam said. As the company expands, an agreed alliance among the world’s three biggest container shipping lines has fueled investor concerns that it could lead to fewer port calls.

CMA CGM SA, Westports’ biggest customer, joined forces with two of the world’s largest container lines in June, agreeing to share vessels to cut costs and end five years of overcapacity that has depressed freight rates. Hong Kong, Port Klang and Rotterdam will suffer the greatest loss of port calls as the alliance, known as the P3 Network, trims trips, according to an HSBC Holdings Plc report dated Nov. 22.

“The P3 alliance is concerning and the company will need to show in the second half of 2014 that there has been little impact to operations,” said Alan Richardson, a Hong Kong-based money manager at Samsung Asset Management, who isn’t invested in Westports shares.

P3 Partners

The alliance, subject to regulatory approval, is seeking to start operations in the second quarter of next year. Port Klang is one of the main hubs serving container traffic along the Straits of Malacca, which links Asia with the Middle East and Europe. The port was the 12th busiest globally by volume of containers handled last year, Westports said in its share sale document.

The other members of the P3 Network are A.P. Moeller-Maersk A/S, which has a stake in the Port of Tanjung Pelepas in southern Malaysia, and Mediterranean Shipping Co., which has a joint venture in a terminal in Singapore with the island-state’s port operator. Westports isn’t currently in talks with prospective strategic investors, Gnanalingam said.

The Malaysian terminal operator said in an Oct. 23 statement that it didn’t expect much impact from the P3 service re-routing in the “near-to-medium-term.” Volumes from non-European trade lanes and trade among Southeast Asian countries will continue to support the company’s growth, Westports said.

‘Tan Sri G’

“It’s not the number of calls you need but the volume per ship,” Gnanalingam said yesterday.

Westports plans to boost capacity to about 15 million twenty-foot equivalent units a year by 2020, from 7.5 million TEUs, he said. Its seventh terminal may be ready by the end of next year, the chairman said.

“That’s our one and only priority, to build the capacity,” he said. “If you don’t build, you won’t grow.”

Westports shares closed 0.4 percent higher at 2.54 ringgit in Kuala Lumpur today, up 1.6 percent from its IPO price of 2.50 ringgit. The stock is rated as a buy at two out of six brokerages surveyed by Bloomberg, with three others rating it the equivalent of hold.

Known as “Tan Sri G” -- Tan Sri is an honorific title bestowed by Malaysia’s royalty -- he has a net worth of about $1.6 billion after listing Westports in October, according to the Bloomberg Billionaires Index. The initial public offering raised 2.03 billion ringgit, making it Kuala Lumpur’s second-biggest this year after UMW Oil & Gas Corp., according to data compiled by Bloomberg.

Gnanalingam started Westports business in 1994 on “a barren, swampy island” and transformed it into Port Klang’s main container terminal operator, according to the website. It attracted an equity investment by Hong Kong billionaire Li Ka-Shing’s Hutchison Port Holdings in 2000.

Intra-Asian Trade

The company is set to benefit from growing intra-Asian trade, HSBC analysts, including Parash Jain and Mark Webb, said in the report. Its transshipment business -- the transfer of containers from deep-sea container ships to smaller feeder ships -- should expand in line with the global container trade, even with competition from neighboring ports, it said.

Westports’ cranes each move 35 containers an hour, compared with the industry standard of 27, giving faster turnaround for vessels, according to its website. The company handled 6.9 million TEUs of containers and 10 million metric tons of bulk cargo last year, it said.

“The most important factor is all about inventory and how do you make sure the cargo leaves the country as soon as it’s manufactured and reaches the destination in the fastest possible time,” said Gnanalingam. “The port business has grown, the volumes have grown and everybody can have a slice of it.”