Eyes on seaport and logistic players
JAYA: It is challenging times ahead for operators in the seaports and logistics sector, given the weak outlook in the global trade growth, says Kenanga Research.
It noted that the World Trade Organisation has recently downgraded its global trade growth forecast to 3% for 2022 from 4.7% previously while remaining cautious for 2023, pegging it at 3.4%.
In addition, a recession in Europe is almost a foregone conclusion given the protracted Russia-ukraine war, resulting in an energy crisis.
There is no sign of China coming out of the pandemic anytime soon given Beijing’s ineffective zero-covid policy, which is prolonging global supply chain disruptions, Kenanga Research said in its latest report on the sector.
“Globally, consumer confidence and spending are likely to take a beating on sustained elevated inflation, rising interest rates and as households deplete their pandemic relief funds,” it added.
Hence, Kenanga Research has maintained a “neutral” call on the sector and remain cautious on the seaports’ operators in general as “they are buffetted by the weak outlook in global trade.”
The research house, however, saw a bright spot in the local logistics sector. “This sector is primarily driven by domestic demand and also, backed by a mega trend of growth in domestic ecommerce,” it said.
Kenanga Research said industry experts projected local ecommerce gross merchandise volume to grow at a compounded annual growth rate of 11% from 2022 to 2027, while its size could reach RM1.65 trillion by 2025 from RM1 trillion currently.
Furthermore, the booming ecommerce will spur demand for distribution hubs and warehouses to enable the just-in-time delivery, reshoring and nearshoring to bring manufacturers closer to end-customers and an efficient automation system.
The research house also expects a strong demand for cold-storage warehouses on the back of the proliferation of online grocery startups.
Given the weaker global trade outlook, Kenanga Research has cut Westports Holdings Bhd’s forecast earnings by 9% each for financial year 2022 (FY22) and FY23.
It lowered the stock’s target price (TP) by 4% to RM3.40, but maintained a “market perform” call.
For Pos Malaysia Bhd, the research house has downgraded the stock to “underperform” with an unchanged TP of 55 sen following a strong recovery in its share price, which “we believe is premature”.
It also expects Pos Malaysia’s conventional mail business will continue to struggle to stay relevant in the digital age.
“The company will have to rethink the strategy for its courier business, given that ecommerce players such as Shopee and Lazada are beefing up their in-house delivery services as well as strengthening their tie-ups with certain logistics players,” it added.
Kenanga Research said its sector top picks are Bintulu Port Holdings Bhd with a TP of RM5.90 and Swift Haulage Bhd with a TP of RM1.01.
“We like Bintulu Port for its steady income stream from handling liquified natural gas cargoes for Malaysia LNG Sdn Bhd, which typically makes up close to 50% of its total profits.