Analysts neutral on transportation sector over next 12 months
KUCHING: Analysts are neutral on the transportation sector over the next 12 months, as they are cautious on the tourism sector and mindful of the increased policy or regulatory risk to businesses operating on a concession basis.
According to AmInvestment Bank Bhd (AmInvestment Bank), while opportunities can be seen in the e- commerce space, it is cautious on the tourism sector.
“Also, we are mindful of the increased policy or regulatory risk to businesses operating on a concession basis, such as Malaysia Airports Holdings Bhd ( Malaysia Airports), given the pro-competition stance of the new administration,” the research firm said.
“On the other hand, the seaport sector may get a lift through the government’s initiatives to engage international shipping
operators or alliances in enticing them to pick Malaysian ports as their transhipment hubs.”
AmInvestment Bank noted that Statista projects the e-commerce sector in Malaysia, estimated to be valued at US$ 3.14 million (RM13.2 million) in 2018, to grow at a compound annual growth rate (CAGR) of 12.7 per cent over the next five years.
The research firm believed the key driving forces are the trend towards online shopping and an expanding peer-to-peer economy.
“Consumers are attracted to online shopping due to price advantages, product range and its sheer convenience. The rapidly expanding e-commerce sector has created huge opportunities for parcel delivery service providers such as Pos Malaysia Bhd.
“Also, 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.
“The DFTZ will serve as a regional e- fulfilment centre (virtual zone) as well as an ecommerce logistics hub (physical zone).”
Apart from Malaysia Airports (the landowner and developer of the KL Aeropolis), the research firm believed local logistics players (including warehouse operators) are poised to garner a slice of the action in the DTFZ physical zone.
On the tourism sector, AmInvestment Bank noted that Tourism Malaysia projects Malaysia’s tourist arrivals to grow by 6.4 per cent to 28.1 million in 2019 and by another 6.8 per cent to 30 million in 2020 (from 26.4 million estimated for 2018) backed by the Visit Malaysia Year 2020 campaign.
AmInvestment Bank was more inclined to believe that these are relatively tall orders given the limited government funding for tourism promotion and the imposition of a departure levy of RM20 and RM40 for Asean and international destinations respectively, effective June 1, 2019 that may discourage budget travelers from visiting Malaysia.
Furthermore, the research firm highlighted on the termination of the 20th Century Fox World Theme Park in Genting Highlands, the cancellation of the 2020 Commonwealth Heads of Government Meeting ( CHOGM) in Kuala Lumpur and an expected slowdown in China’s economy which may reduce its outbound tourists. Chinese tourists contributed 12 per cent of Malaysia’s tourist arrivals for the first nine months of 2018 (9M18), it said.
“Tourist arrivals have a direct impact on the performance of lowcost carrier AirAsia Group Bhd and AirAsia X Bhd and airport operator Malaysia Airports.”
AmInvestment Bank also projected heightened policy or regulatory risk for Malaysia Airports, noting that the group may be subject to higher lease rentals to support the valuations for the impending initial public offering (IPO) of the Airport real estate investment trust (REIT).
The research firm noted that Malaysia Airports operates airports which are currently leased from the government, and upon the IPO, from the Airport REIT.
“Also,itappearsthattheMalaysia Aviation Commission (Mavcom) is moving ahead with plans to implement a new passenger service charge (PSC) calculation in accordance to airport’s facilities (which is more likely to result in lower PSC versus increased PSC).
“There is uncertainty with regards to Malaysia Airports’ participation in the future expansion of airports in Malaysia.
“We believe the Airport REIT could potentially assume the role, or the government may decide to carry it out via open bidding to promote operational and cost efficiency.”
Meanwhile,AmInvestmentBank was more upbeat on Westports Holdings Bhd in 2019 with a projected throughput growth of four per cent as compared with two per cent estimated for 2018, assuming that the lip service and leg work provided by the government will pay off.
“Transport Minister Anthony Loke will soon meet up with the management of Cosco Shipping Corp Ltd to entice the Chinese shipping giant to make Malaysia its transhipment hub in the region.
“Also, despite the US- China trade war, regional trade activities, especially the electrical and electronic ( E& E) segment, are expected to remain robust.”