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The Three Numbers That Float Westport Holdings Berhad

Not every town or city along a coastline can be a port. The location has to be easily accessible by road and rail. The waters in the area also need to be deep enough to provide large ships with safe harbour.

Westport Holdings Berhad (KLSE: 5246.KL; KLSE: WPRTS.KL), which operates Port Klang in Malaysia has both those vital qualities. That should give the company an in-built competitive moat.

Westport Holding’s high Return on Equity (RoE) could be testament of its competitive advantage. At 27.3% it means that the port operator delivered MYR27.20 on every 100 ringgit invested by shareholders. This is almost three times more that median RoE for the 30 companies that make up the Kuala Lumpur Composite Index (KLSE: ^KLCI).

Westport’s extraordinary RoE can be traced to its high Net Income Margin, which is 50% higher than the market average. At 30.0%, the owner of Port Klang generated MYR30 on every MYR100 of revenue. By way of comparison Hutchison Port Holdings (SGX: NS8U) reported a Net Income Margin of 13.8% last year.

Westport Holdings has a surprisingly high Asset Turnover. In general, asset-heavy companies don’t. But Westport generated MYR42.7 of revenues on every MYR100 of asset employed in the business, for an Asset Turnover of 0.42.

That said, Westport is quite heavily leveraged. It had Total Liabilities of MYR2188.5 and Total Assets of MYR4102.5, which equates to a Leverage Ratio of 2.12. Over half of the Total Liabilities was made up of long-term debt.

By unloading the Return on Equity for Westport Holdings, it is easy to see how the port operator floats the boat. Its RoE of 27.3% is the product of a high Net Income Margin of 30.0%; a remarkable Asset Turnover of 0.43 and a Leverage Ratio of 2.12.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.