Transportation and logistics to see recovery

25 Jan 2021 - BY: John Yeoh

PETALING JAYA: The transportation and logistics sector is projected to see a better year, as global trade and travel recover with Covid-19 vaccination programmes getting underway worldwide, says AmInvestment Research.

The research unit has upgraded the transportation and logistics sector to overweight from neutral previously.

Regarding the ports segment, AmInvestment Research said it has bounced back and shall do even better in 2021, as evidenced in the record high Shanghai Containerised Freight Index (SCFI), often used to gauge the health of global trade.

The research unit believes the Covid-19 pandemic as well as trade tensions between major economies are reshaping the global supply chain, resulting in a diversion of investments from China to the South-East Asian region, thus boosting container throughput in the region.

AmInvestment Research has projected container throughput at both Westports Holdings Bhd and the ports of MMC Corp Bhd to grow by 3% in 2021 (after contracting by an estimated 1% to 2% in 2020) and returning to the pre-pandemic growth levels of 3% to 5% in 2022.

As for air travel, according to the International Air Transport Association, the passenger volume will not return to 2019 levels until 2024, with domestic markets recovering faster than the international service.

On a brighter note, it is assumed that borders will start reopening by mid-2021, with the growing availability of Covid-19 vaccines.

Meanwhile, the Malaysian Aviation Commission is projecting the country’s air passenger traffic to rebound by 94.2% to 100.3% year-on-year in 2021, which is largely in line with AmInvestment Research’s forecast of a 100% traffic rebound for both AirAsia Group Bhd and Malaysia Airports Holdings Bhd (MAHB) in 2021. This will translate to around 50% of passenger traffic as compared to the pre-Covid-19 level.

Regarding the logistics segment, AmInvestment Research said the parcel delivery segment will continue to be the winner even post-pandemic, as it believes consumers have permanently shifted their shopping habits from physical stores to online channels, lifting the growth path for parcel volume to another new level.

Meanwhile, the Malaysian Communications and Multimedia Commission’s recent initiatives to address the logistics segment’s overcrowded issues is seen as positive, as it finally shows the authorities’ will to intervene in the unhealthy competition within the sector.

The National Postal and Courier Industry Lab is set to strengthen the industry and this will benefit all existing players, especially those that already have a strong footprint in the country like Pos Malaysia Bhd and GD Express Carrier Bhd.

Adopting a set of well established infections prevention and control measures will help to minimise the risk of contracting COVID-19 during a flight

The National Postal and Courier Industry Lab is set to strengthen the industry and this will benefit all existing players.

AmInvestment Research’s top pick within the sector is MMC, with a fair value of RM1.56, and Westports, with a fair value of RM4.83, in anticipation of the recovery in container throughput over the next six to 12 months.

It also has buy calls on MAHB and Pos Malaysia, with fair values of RM6.64 and RM1.33, respectively. It rates AirAsia as sell, with a fair value of 66 sen.

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