Neutral on ports, logistics despite pick up

Since the majority of ships that call at Westports are from the intra-Asia routes, the impact from the possible future shutdowns and quarantines will likely hit throughput, though the extent is uncertain depending on the pandemic duration. Kenanga Research

KUCHING: Analysts maintain their neutral call on the ports and logistics sector, premised on gradual earnings recovery from ports players starting from 2021 on the back of Covid19 vaccinations roll- outs, normalisation of domestic and global economic activities, as well as pent-up demand effect in general.

The team at Kenanga Investment Bank Bhd (Kenanga Research) saw that port player Westports Holdings Bhd (Westports) experienced a recovery in throughput volumes starting 2021.

“Since the majority of ships that call at Westports are from the intra-Asia routes, the impact from the possible future shutdowns and quarantines will likely hit throughput, though the extent is uncertain depending on the pandemic duration,” it said in its notes yesterday.

“While we believe that Westports is well on-track with its expansion plans to cater for future trade volume growth, we reiterate our view that the expansion project is a longer-term prospect with full completion by 2040.”

For dividends, Kenanga Research saw that Westports’ payout guidance was lowered from 75 to 60 per cent for its financial year 2020 (FY20) to conserve cash for 2021 when its new container terminal expansion project commences with the purchase of Marina Land and with land reclamation.

“Furthermore, empty containers that comprised 25 per cent of its transshipment volume in the third quarter (3Q) of FY20 have already mostly been send back to China up to October 2020. Hence, the recycletime could be pushed back to 2021.”

As for MMC Corporation Bhd (MMC), Kenanga Research saw that its ports, especially Port of Tanjung Pelepas, and associates, Malakoff Corporation Bhd (Malakoff), are the main earnings contributors.

“MMC’s port and logistics division has been showing improvement in performance, underpinned by economic recovery momentum since the resumption of the global and domestic trade activities,” it continued. “Currently, its ports portfolio consists of PTP, Johor Port, Northport, Penang Port and Tanjung Bruas Port.

“That said, we do not discount management continuing their pursuit to acquire additional ports to boost their profile as the largest port operator in the country.

“We gathered that while its construction order-book is currently at circa RM4.9 billion (90 per cent from MRT Line 2, expected to be completed by 2022), management is actively bidding for new projects in order to meet its targeted order-book replenishment of about RM500 million per annum.

“Going forward, MMCCORP’s earnings are anticipated to be largely buoyed by its ports, especially PTP as well as operation and utilities, namely Malakoff.”

All these led Kenanga Research to maintain its neutral view on the sector given the lack of catalysts in the near-term.

— Bernama photo Since the majority of ships that call at Westports are from the intra-Asia routes, the impact from the possible future shutdowns and quarantines will likely hit throughput, though the extent is uncertain depending on the pandemic duration.