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Seaports the bright spot for transport sector

Tuesday, 31 December 2019 | 00:00

AmInvestment Research sees the seaport segment as the bright spot for the transportation sector, forecasting a container volume growth of 4% to 5%.

It said the prospects of airlines and airport operators are favourable, backed by tourist arrivals projected to reach 30 million in 2020.

The research house is maintaining a neutral call on the transportation sector over the next 12 months.

In a sector update note, it said the outlook for the port sector in the region (Malaysia included) is resilient, underpinned by global trade and investments in the manufacturing sector that generate tremendous inbound (feedstock) and outbound (finished product) throughput for ports.

“There have been significant relocations of the manufacturing bases by multinational companies out of China to the region due to the rising labour and land costs, exacerbated by the US-China trade war,” it said.

In addition, it noted that an added competitive advantage of seaports in Malaysia is its low port charges, bolstered further by a weak ringgit.

“The growth in local seaports will be underpinned by expansion plans, that is, a new liquid bulk jetty and eight new container terminals (CT10 to CT17) (that will double its handling capacity from 14 million to 28 million TEUs by 2040) and new triple-E cranes and development of autonomous driving terminal tractors (a JV with Terberg Tractors Malaysia) at Pelabuhan Tanjung Pelepas (PTP).”

AmInvestment Research believes Tourism Malaysia’s forecast of 30 million tourist arrivals in 2020 is achievable, as historically it has surged during other VMYs.

“Also helping are a weak ringgit and ‘tourist diversion’ to Asean destinations (Malaysia included) from Hong Kong amid unabated political unrest and protests.

“The positive outlook for Malaysia’s tourist arrivals will be a tailwind to AirAsia’s key strategy to aggressively grow its top line to mitigate the higher cost structure arising from the sale and leaseback of its aircraft; and the high start-up costs of its digital ventures,” said the research house.

Meanwhile, the local e-commerce sector is expected to expand rapidly with Fitch Solutions projecting a CAGR of 14% in 2018–2022.

AmInvestment Research noted the online shopping segment has created huge opportunities for parcel delivery service providers such as Pos Malaysia Bhd and GD Express Carrier Bhd.

“However, the sector is weighed down by an overcrowding of participants resulting in cut-throat competition and severe squeeze in margins of the service providers.

“In addition, service quality is an issue, particularly the inability of logistics players to cope with a sudden surge in volume during promotional periods by e-commerce operators,” it added.

AmInvestment Research’s top stock picks for the sector are Westports Holdings Bhd and MMC Corp Bhd.

“We believe the seaport operators are beneficiaries of the trade diversion from the US-China trade war. Also helping is the resilient outlook in the region’s port sector, underpinned by investments in the manufacturing sector that generate tremendous inbound and outbound throughput, couple with the weak currency and cheaper port charges,” it said.
Source: The Sun Daily

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