Logistics sector to gain from e-commerce surge
KUCHING: The establishment of the Digital Free Trade Zone ( DFTZ) as well as Alibaba’s regional distribution hub in Malaysia are expected to benefit local logistics players with total supply chain management and last-mile delivery competencies.
The research arm of Affin Hwang Investment Bank Bhd (AffinHwang Capital) said the launch of the DFTZ and the establishment of Ali bab a’ s regional distribution hub in Malaysia will create a robust ecommerce ecosystem that aims to spur growth in Malaysia’s digital economy.
“We expect logistics players with total supply chain management and last-mile delivery competencies to benefit from this creation,” it said in the note.
The DFTZ was officially launched yesterday by Prime Minister Datuk Seri Najib Razak and Alibaba Group Holding Ltd (Alibaba) chairman Jack Ma. The DFTZ initiative, first tabled and unveiled in Malaysia’s Budget 2017, is expected to be the world’s first hub which merges physical and virtual zones, with additional online and digital services to facilitate international e- commerce. It is also expected to invigorate Internet- based innovation.
The DFTZ will likely to find its home in KLIA Aeropolis, and as part of the development, Chinese e- commerce giant Alibaba is expected to establish its regional distribution hub in DFTZ to cater for its expansion within Southeast Asia. According to Reuters, sources have revealed that the hub is set to generate more than RM7 billion worth of domestic and foreign investments.
“Logistics players are set to enter into earnings upcycle,
We expect logistics players with total supply chain management and last-mile delivery competencies to benefit from this creation. AffinHwang Capital
should the initiatives take off, in the form of pent-up demand for last-mile delivery, total supply chain management, as well as warehousing requirements,” said AffinHwang Capital.
Conceptually, DFTZ aims to level the playing field for smalland-medium enterprises (SMEs) to compete on a global scale with a seamless and integrated e- commerce ecosystem complete with logistics, payment, financing and inspections facilities.
“One of the key attractions of DFTZ is the tax duty free and customs clearance exemption for e- commerce deliveries into/from DFTZ, which acts like a virtual bonded warehouse. Currently, all goods above RM500 are required to undergo customs checks and liable to import/export duties,” the research team added.
Meanwhile, it believed logistics players such as Tiong Nam Logistics Holdings Bhd ( TNL), Pos Malaysia Bhd ( Pos Malaysia), and airport operator Malaysia Airports Holdings Bhd ( MAHB) will be the main beneficiaries to this initiative.
“We see TN Las prime beneficiary given its dominance in warehouse capacity and unparalled trucking network.
“Recent venture into SinoMalaysia trucking network and the introduction of a new last-mile delivery brand further reinforce our conviction for TNL as ecommerce exposure.
“MAHB could benefit from the e- commerce expansion via the monetisation of KLIA Aeropolis, as well as the higher passenger f low, although the impact is unlikely to be significant in the near-term.
“We also expect Pos Malaysia to benef it via its air cargo di st r ibution capabi l it ies, dominance in nationwide courier delivery competence, as well as the transformation of the LCCT into world- class logistics hub with multimodal supply chain fulfilment,” the research team added.
It further explained that the DFTZ initiative would fall within the Air Cargo & Logistics cluster, as part of the e- commerce ecosystem development.
“MAHB is likely to have twopronged benefits with the DFTZ development, as it would be able to monetise the land value, as well as benefiting from higher passenger growths and aircrafts landing charges with the ramp-up in ecommerce business.
“That said, earnings accretion is unlikely to be significant in the near-term in our view, given that MAHB generates half its earnings from the Malaysian operations,” it said.
For Pos Malaysia, AffinHwang Capital said the recent acquisition of KL Airport Services Sdn Bhd ( KLAS) allowed Pos Malaysia to position itself as an end-to- end integrated logistics fulfilment solutions provider to tap into the growing demand of e- commerce services both domestically and internationally.
“With two Boeing 737- 400 freighters under its fleet and plans to expand to six aircrafts within the next five years, Pos Malaysia is poised to tap into the air cargo logistics, which could connect China and Malaysia for airfreight deliveries for Alibaba.
“With a total integrated logistics solutions eco-system offerings, we believe Pos Malaysia is poised to benefit from the establishment of Alibaba’s regional distribution hub.
“Its scale and dominance allows it to provide not only the first and last mile services but also the intermediate requirements needed to established an efficient logistics solution,” it opined.