Seaport and parcel delivery growth seen continuing in 2021


AMINVESTMENT Bank Bhd (AmInvest) expects seaport operators will continue to benefit from the growing containerised cargo movements worldwide while the parcel delivery segment will continue to ride on the exponential volume growth driven by e-commerce transactions.

The investment bank has the view that the Covid-19 pandemic has permanently shifted part of consumers’ shopping activity to online.

“While lagging at present, we believe the recovery in the air travel industry shall gradually take hold as international borders reopen with more economies in the world reaching herd immunity on the back of robust vaccine rollouts,” AmInvest said.

AmInvest, in a note yesterday, maintained its ‘Overweight’ recommendation for the transportation and logistics sector.

According to the investment bank the seaport segment has emerged from the pandemic since mid-2020 and stayed resilient, underpinned by strong demand for seaborne freight as reflected in the record Shanghai Containerised Freight Index.

“We believe this has been supported by the recovery in demand for consumer and industrial goods such as apparel, accessories, machinery and automotive parts in the West, the restocking activities by big retailers such as Inc and Walmart Inc and increased semiconductor production in response to the acute chip shortages worldwide, especially in the automotive industry,” it stated.

Congestion at ports has triggered the imbalance in the East-West seaborne trade as economies in the West are reopening faster than in the East due to better accessibility to vaccines.

AmInvest expects the port congestion issue to gradually ease as shipping liners take delivery of new containers, the East catches up with the West in recovery as vaccination programmes gain momentum.

Westports Holdings Bhd, being one of the key transhipment ports in the region, could still be punching below its weighting amid the port’s congestion.

“Its operational efficiency is hurt amid excessive traffic at the port and as shipping lines miss their port call schedules, having been held up too long during their calls in the previous ports.

“However, assuming the situation is to revert to normalcy over the immediate term, Westports should return to a stronger growth path. As such, we are projecting Westports’ container volume to grow by a stronger 5% in the financial year 2022 forecast (FY22F), from a mere 2% in FY21F,” said AmInvest.

On the other hand, the parcel delivery segment will continue to ride on the exponential volume growth as the pandemic has altered consumers’ shopping habits to a combination of visiting physical stores and browsing online channels.

“We believe consumers have permanently shifted part of their shopping to online, having experienced the convenience and price competitiveness without a significant compromise on product quality,” the bank noted.

AmInvest said the moratorium for new courier service licences will prevent the already crowded playing field from growing bigger.

The investment bank remains cautious on Pos Malaysia Bhd’s near-term outlook as its operational efficiency has resulted in high costs structure, while its service quality has posed risks in losing market share, which remain a big concern.

“Pos Malaysia might be subject to penalties if it continues to miss the quality-of-service standards. Under the asset-sharing initiative, Pos Malaysia might also lose its advantages over its inherited extensive network coverage, as other service providers can now ride on their network to gain more coverage and expand their services,” it said.

This will result in Pos Malaysia losing its market share to competitors that have been expanding aggressively and are operating with much leaner and efficient business structure.

Nevertheless, AmInvest said the prospects for the aviation sector remain unexciting for 2021.

“The Malaysian Aviation Commission is projecting the air passenger traffic in Malaysia to contract between 22.9% and 29.1% year-on-year (YoY), which is in line with our assumption of 20% contraction YoY,” it said.

AmInvest has picked Malaysia Airports Holdings Bhd which is a relatively safe bet given its business of airport operation of strategic national interest and strong shareholders of government-linked entities.

“We are cautious on AirAsia Bhd, despite a highly dilutive cash call, and it remains to be seen if it will emerge from the current crisis given its severely damaged balance sheet in the aftermath of the pandemic.

“We believe, as far as the transport and logistics sector is concerned, there are silver linings during the pandemic. For instance, certain seaport operators locally have managed to gain market share from the diversion of cargoes from congested ports,” AmInvest added.