PETALING JAYA: The transportation and logistics industry is expected to see a new phase of growth as the economy gradually emerges from the Covid-19 fallout.
Seaport operators, for instance, will continue to benefit from the growing containerised cargo movements worldwide while the parcel delivery segment will continue to ride on the exponential volume growth as the pandemic has permanently shifted part of consumers’ shopping to online.
As for the air travel industry, recovery is expected to gradually take hold upon the eventual reopening of international borders, as more economies reach herd immunity on robust vaccine rollouts.
According to AmInvestment Bank Research (AmInvest), the seaport segment has remained resilient since emerging from the pandemic since mid-2020, underpinned by strong demand for seaborne freight, as reflected in the record Shanghai Containerise Freight Index (SCFI), which is a barometer of the containerised trade globally.
“We believe this has been supported by the recovery in demand for consumer and industrial goods such as apparel, accessories, machinery parts and automotive part in the West; the restocking activities by big retailers (such as Amazon and Walmart); and increased semiconductor production in response to the acute chip shortages worldwide, ” the brokerage noted.
The parcel delivery segment, on the other hand, will ride on strong volume growth amid the growing trend of online shopping, spurred by the pandemic.
“We believe consumers have permanently shifted part of their shopping to online, having experienced the convenience and price competitiveness without a significant compromise on product quality, ” AmInvest said.
Overall, the brokerage maintained “overweight” on the transportation and logistics sector.
Its top pick for the sector is Westports Holdings Bhd, with a fair value RM5.07.
“We believe the throughput of seaports, Westports included, will continue to grow as global trade recovery gains further momentum, backed by the reopening of economies, businesses and borders.
“There have been significant relocations of the manufacturing base by multi-national companies out of China to the region due to the rising labour and land costs, exacerbated by the United States-China trade war. Westports has charted a long-term expansion plan to capitalise on these, ” it added.
AmInvest projected Westports’ container volume growth to pick up to 5% in financial year ending Dec 31, 2022 (FY22), from the estimated 2% in FY21.
Despite optimism in the parcel delivery segment, AmInvest remained cautious on Pos Malaysia Bhd for its near-term outlook, as the latter’s operational efficiency, which resulted in high cost structure, and service quality, which poses risks in losing market share, remained big concerns.
AmInvest’s fair value for Pos Malaysia stood at 85 sen.
For proxy to the recovery in the air travel industry, the brokerage picked Malaysia Airports Holdings Bhd (MAHB), with a fair value of RM6.57. It noted MAHB’s business of airport operation was of strategic national interest and it had strong shareholders of government-linked entities.
“We believe, as far as the transport and logistics sector is concerned, there are silver linings during the pandemic. For instance, certain seaport operators locally have managed to gain market share from the diversion of cargoes from congested ports, ” AmInvest said. Meanwhile, the significantly expanded parcel delivery market locally has allowed new and smaller players to find their niches and co-exist with the more established and larger players, it said.
“The airlines and airport operators see opportunities in increased demand for freight services and the survival instinct has prompted them to innovate and develop new income stream while containing their cost to a bare minimum, ” it added.