Malaysian transport sector faces headwinds
PETALING JAYA: AmInvestment Bank, which is neutral on the local transport sector over the next 12 months, is mindful of various headwinds in the sector such as the increased regulatory risk on the back of the change in the political landscape following the 14th general election (GE14), potential dial-back of certain major initiatives by the preceding administration and rising fuel costs.
The research house, however, noted that there are plenty of opportunities in store for players, particularly, in the tourism and e-commerce space.
It finds the projection by Tourism Malaysia, which estimated Malaysia’s tourist arrivals to surge by a whopping 28% to 33.1 million in 2018 from 25.9 million in 2017, and will hit 36 million in 2020, a tad optimistic given that the numbers had stagnated at about 26 million over the last three years.
“Nonetheless, we do agree that the trend for tourist arrivals in coming years is upwards, as Malaysia is slated to host a series of high profile international events. Low-cost carrier AirAsia and airport operator Malaysia Airports are the main beneficiaries of the growing tourist arrivals,” it said.
The rapidly expanding e-commerce sector, particularly online shopping, has created huge opportunities for parcel delivery service providers such as Pos Malaysia. Malaysia’s presence in the regional and global e-commerce market is on the cusp of a quantum leap, driven by the Alibaba-backed Digital Free Trade Zone (DFTZ) project in the KLIA Aeropolis.
“Apart from Malaysia Airports (the landowner and developer of the KL Aeropolis), we believe local logistics players (including warehouse operators) are poised to garner a slice of action in the physical zone of the DTFZ.”
On the other hand, AmInvestment Bank said regulated businesses may face a higher regulatory risk, as the new administration strives for better deals for the rakyat, as promised in its election manifesto. Under these circumstances, it is unlikely, for instance, for airport operator Malaysia Airports to secure an upward revision in passenger service charges.
Also, there are concerns if the DFTZ project will go ahead as planned. All China-Malaysia deals signed in recent years will now come under scrutiny.
Meanwhile, it said transshipment seaport operator Westports will still feel the negative impact from the recent reorganisation of the global shipping alliance, resulting in the diversion of transshipment cargo volumes to Singapore.
“On a brighter note, we expect gateway cargo volumes to continue to grow in coming years, thanks to Malaysia’s robust exports and imports. Meanwhile, Bintulu Port will be weighed down by start-up costs at its newly completed Samalaju Industrial Port.”
AmInvestment Bank’s top pick for the transport sector is AirAsia Group Bhd.
“AirAsia is a good proxy to the growing low-cost air travel market in the region, underpinned by rising per capita incomes and a young demographic. Its strong market presence enables it to compete effectively against its rivals. It has struck a chord with investors with its plans to monetise some of its auxiliary businesses,” it said.