By NUR HAZIQAH A MALEK / Pic By MUHD AMIN NAHARUL
PORTS across South-East Asia, including in Malaysia, are well-positioned to gain from shifting sourcing patterns accelerated by the pandemic, as manufacturing bases of multinational companies relocate outside of China.
AmInvestment Bank Bhd in a note yesterday recommended investors to stay invested in the seaport segment via West- ports Holdings Bhd and MMC Corp Bhd, both of which have ‘Buy’ ratings with fair values (FVs) of RM5.07 and RM1.68 respectively.
“We maintain our ‘Overweight’ recommendation for the transportation and logistics sector. We believe the seaport segment is poised to grow further in 2021 as global trade recovery gains further momentum, backed by the reopening of economies, businesses and borders, as well as the roll- out of huge stimulus packages which will continue to support consumption and investment,” the research house said.
In the immediate term, it said some seaport operators will face challenges from the port congestion worldwide, while others stand to gain.
AmInvestment projects the gridlock to have a slight negative impact on Westports and has cut its financial year 2021 (FY21) net profit forecast by 2%, assuming that its throughput will grow at 2% versus the previous 3%.
“Being a transshipment port operator, Westports is not spared the loss of operational efficiency from the congestion.
“However, we believe it is more prepared this time around, thanks to the experience gained during the similar situation at the height of the pandemic last year,” it said.
It noted that Westports has since created additional yard space and imposed stricter storage charges to help ease the situation at its port.
“Priority berthing was given to ships with more containers to be loaded than discharged to reduce the number of containers in the storage yard.
“The Port Klang Authority also withdrew the additional free storage period and the exemption of special services request charges on empty export containers, as well as expedited the custom and quarantine inspection clearance by increasing manpower and setting up special lanes to facilitate the release of reefer containers,” it said.
Concurrently, MMC’s net profit forecast was raised by 7%, assuming its throughput will grow at 6% versus 3% previously, while its FV was adjusted upwards by 11% to RM1.68 and ‘Buy’ rating maintained.
“The transshipment ports under MMC’s stable — such as Port of Tanjung Pelepas (PTP) and Northport, that are largely secondary in the geographical area they serve and hence, less congested — stand to gain from the diversion of port calls by shipping lines from busier primary ports amid prolonged congestion, resulting in increased volumes and market share gains.
“Recall, during the pandemic-induced congestion in 2020, PTP registered a record container volume of 9.85 million twenty-foot equivalent unit, which increased by 8% year-on-year, while Northport recorded its highest ever monthly volume in December 2020,” it said.
Westports and PTP are poised to gain market share from the Port of Singapore Authority (PSA) following the latter’s plans to raise its port charges in two phases from Jan 1, 2022, thus widening further gaps in port charges between Malaysia and Singapore.
“For instance, Westports’ market share in the Strait of Malacca shot up to 23% in 2015 from 20% to 21% over the last five years prior to that, a year after PSA raised its port charges in 2014.
“While we maintain our assumptions for FY23, we believe there could be upside to both Westports and PTP due to this latest development,” it said.