* Shares climb as much as 8 pct in first day of trade
* Westports banks on efficiency, higher capacity to grow
* Competition heating up among Malacca Straits ports
* IPO puts money in existing shareholders' pockets
By Niluksi Koswanage and Yantoultra Ngui
KUALA LUMPUR, Oct 18 (Reuters) - Malaysia's WestportsHoldings jumped as much as 8 percent in its marketdebut on Friday, with investors keen on its strategy to treatcontainer ships like Formula One race cars as they ply the900-km long Malacca Straits.
Calling itself a pit stop, the port operator backed byAsia's richest man, Li Ka-shing, derives 70 percent of itsrevenues from transhipments where super-sized ships movecontainers carrying finished goods to smaller vessels fortransport to nearby markets.
Its aim is to shift 35 containers an hour instead of theindustry-standard 25, a feat it compares to F1 pit crews turningaround a race car in seconds and one that it hopes will help it weather a shipping industry downturn and fierce competition fromother ports in the region.
Westports debuted on the Kuala Lumpur stock exchange with a market value of $2.9 billion. It is the largest listedport operator along the Malacca Straits that link Europe and theMiddle East to Asia and carry 40 percent of global shippingtrade.
"In terms of efficiency and productivity, Westports is justtop notch," said Bharat Shah Joshi, an investment manager withAberdeen Asset Management that oversees $5 billion worth ofequities in Malaysia.
"The strong debut is driven by investors who want a slice ofthe action along the Malacca Straits where we will see a lot ofexpansion in the next three to five years."
Its shares jumped as high as 2.71 ringgit from its IPO priceof 2.50 ringgit, as institutional funds left out during thebook-building process chased a small flotation. Target pricesset by four brokerages ranged from 2.75 to 2.97 ringgit.
The $680 million raised from selling 23.8 percent of thecompany will be distributed to existing shareholders - frombillionaire Li to port workers - rather than used to fundexpansion or repay debt. Westports said the stock market listingwas more about branding and returning cash to shareholders thanraising capital.
BIG CHALLENGES AHEAD
The shipping industry is in its fifth year of a downturn,despite recent signs of a rise in bookings from China, asovercapacity weighs and big container firms scramble to formvessel-sharing alliances to cut costs.
"The dust needs to settle among the shippers. We call it ashipping downturn but there is container volume growth," saidWestports Chief Executive Officer Ruben Gnanalingam, whosefamily owns a 46.8 percent stake in the company.
"Ships can come and go but the port business always survivesso long as economies thrive," he said in an interview withReuters on Thursday.
The world's three biggest shipping firms - A.P.Moller-Maersk's Maersk Line unit, Switzerland-basedMSC Mediterranean Shipping Company S.A., and France's CMA CGM - announced plans in June to share 255 ships and cut costs.
Once European Union anti-competition officials give thegreen light, expected by next year, the trio will have to choosewhich hubs across the world will be their main ports of call.
Their focus is the Asia-Europe line, which has beenlacklustre due to the uneven pace of the global economicrecovery and where overcapacity has driven spot freight rates toloss-making levels.
On the Malacca Straits, Westports may lose out to the otherports as no shipper has invested in it, even though CMA accountsfor 10 percent of revenues, bankers and industry analysts said.
Maersk, on the other hand, has a 30 percent stake in SyedMokhtar's Port of Tanjung Pelepas (PTP) on the southern tip ofMalaysia and MSC jointly controls a terminal further down inSingapore with the island-state's sole port operator.
"People forget these three shippers are not about to channelall the vessels in the alliance into one hub on the straits ifthe green light is given from the EU," Gnanalingam said. "Thereis the question of capacity constraints, which every port alongthe stretch is trying to deal with."
THE LI CONNECTION
To attract big-name customers, Westports, operating fromcentral Malaysia's Port Klang, speeds it up with cranes thatoperate 1.4 times faster than the industry standard, which meansships can get in and out faster. Last year, it kept vesselswaiting just two to three hours for berths compared with anaverage of four hours seen in other ports along the straits.
The connection with Li, who owns more than a fifth ofWestports through a unit of Hutchison Whampoa Ltd, isa competitive advantage, Gnanalingam said.
"Li opens doors. His companies are involved in 50 over portsand they organise these meetings that give you access to thelatest out there from engineering, IT and the business," hesaid. "You share, learn and compete with one another."
Last year, Westports handled 69 percent of the 10 milliontwenty equivalent unit (TEU) containers passing through PortKlang - the 12th busiest port in the world.
BUILDING UP VOLUMES
Westports will expand capacity by 68 percent to 16 millionTEUs, in part to comply with requirements from the Malaysiangovernment before it extends the company's concession by 30years to 2054. Gnanalingam said Westports will tap debt marketsto fund growth.
Westports faces keen competition in the battle to ramp upcapacity from politically connected Syed Mokhtar, whoseinfrastructure group MMC Corp controls PTP and JohorPort in southern Malaysia.
PTP has spent $450 million to lift its annual handlingcapacity by 25 percent to 10.5 million TEUs by next year.
"Competition is not a scary prospect in the Malacca Straits.Everyone grows," said Gnanalingam. "When we first started out in1990s, 15 million TEUs a year came through the straits. Now its50 million this year. You can't get that anywhere else."
- Investment & Company Information
- Malacca Straits