Earnings growth risk still seen across shipping, ports and logistics sector

KOTA KINABALU: Analysts are projecting that earnings growth risk is still seen across shipping, ports and logistics sector going forward.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) recapped that that latest results were once again disappointing with five out of eight counters within its sector universe posting results that were below expectations.

It highlighted that these included, among others, Pos Malaysia Bhd which recorded grossly poorer first quarter of 2019 (1Q19) results due to weaker performances from across the segments and MISC Bhd’s (MISC) first half of 2018 (1H18) results which more than halved year on year, dragged by poorer performances across all the group’s segments.

“Moving forward, we still see earnings growth risk across the entire sector,” the research arm said.

According to Kenanga Research, courier and logistics players are expected to face margins pressure amidst rising competition and operating costs.

“As such, revenue growth from e-commerce volumes have failed to fully cascade down to visible earnings growth.”

As for petroleum and chemical tanker charter rates, Kenanga Research noted that these are still showing little signs of sustainable recovery amidst tonnage oversupply in the market.

The research arm further noted that this would impact MISC’s earnings given that 41 per cent of the group’s petroleum and chemical portfolio are in spot charters as at end-2Q18.

“Nonetheless, bulk of its earnings is still sustained by stable long-term liquefied natural gas (LNG) charters.”

Overall, Kenanga Research maintained ‘neutral’ on the sector, given a lack of re-rating catalyst.