PETALING JAYA: The seaport and logistics sector in Malaysia is seen entering a robust phase amid the expected rebound of global trade next year, and the continued growth of eCommerce in the country.
The positive outlook is further supported by the synchronised recovery of the global economy, which could happen in the second half of 2024 (2H24), as the central banks of advanced economies ease their monetary policies.
As such, Kenanga Research upgraded its call on the seaport and logistics sector to “overweight” from “neutral”.
On the seaport segment, the brokerage noted in a report yesterday that the World Trade Organisation had projected global trade volume to grow 3.3% in 2024, more than quadrupling the 0.8% growth estimated for 2023.
“Already, there have been green shoots of recovery in the intra-Asia trade.
“We believe that there is a good chance for a more synchronised recovery in the global economy towards 2H24, underpinned by policy easing by central banks in advanced economies,” Kenanga Research wrote. “This augurs well for port operators,” it added.
As for the logistics segment, it said, there was a bright spot in the domestically driven third-party logistics sector, which was less vulnerable to external headwinds.
It noted the logistics segment would be buoyed by a continuing boom in eCommerce.
Citing industry experts, Kenanga Research noted that local eCommerce gross merchandise volume was expected to grow at a compounded annual growth rate of 7% from 2023 to 2027, reaching RM1.9 trillion by 2027 from RM1.4 trillion in 2023.
“The growth in eCommerce will spur demand for distribution hubs and warehouses to enable just-in-time delivery; re-shoring and near-shoring to bring manufacturers closer to end-customers; efficient automation systems including interconnectivity with customer systems, and warehouse decentralisation to reduce transportation costs and de-risk the supply chain,” the research house said.
“There is also strong demand for cold-storage warehouses on the back of the proliferation of online grocery start-ups,” it added.
It likes Westports for the company’s resilient earnings, underpinned by long-term contracts with key clients such as Ocean Alliance; long-term growth prospect driven by the Westports 2.0 expansion project; and price competitiveness, that is, lower transhipment tariffs versus peers such as Port of Tanjung Pelepas and Port of Singapore.
Kenanga Research liked Swift for the company’s leading position in the Malaysian haulage business, with close to 10% market share.
Swift also has value-added integrated offerings resulting in a strong pre-tax profit margin of 10% compared with the industry average of 4%; and the tremendous growth potential of its warehousing business, riding on growth of domestic eCommerce.
Source: The Star