PETALING JAYA: Kenanga Research has maintained a “neutral” call on the seaport and logistics sector due to the uncertainties caused by trade tariff.
The research house said global trade had deteriorated sharply from tariffs and shipping diversions, particularly from the Red Sea.
In addition to that, ships avoiding the Suez Canal in the Middle East and instead sailing around the Cape of Good Hope at the tip of Africa has resulted in longer voyages on the Asia-Europe route, therefore reducing the frequency of calls that shipping lines make at Westports Holdings Bhd
’s ports.
While the World Trade Organization (WTO) revised upwards its projection for this year’s global merchandise trade volume growth to 2.4% from 0.9%, it also cut its projection for next year to 0.5% from 1.8%.
On a more positive note, the WTO cited an emerging trend of connections being built between the economies of countries such as Malaysia, Singapore, India and Vietnam.
The research house said it believes Malaysia will benefit from trade diversion as the global trade repositions itself around the higher US tariff barriers.
“Container growth volume for Malaysian ports is expected to remain in single-digits, partially benefitting from the potential trade diversion amid US-China trade tensions while the biggest beneficiary in the long-run could be Bintulu Port Holdings Bhd due to its exposure to China as its biggest export market for liquefied natural gas,” the research house said.
Meanwhile, Kenanga Research said the logistics sector is likely to ride the boom in eCommerce.
It said that industry experts project the local gross merchandise volume for eCommerce to grow at a compounded annual growth rate of 7% from 2023 to 2027, reaching RM1.9 trillion by 2027 from RM1.4 trillion in 2023.
“The booming eCommerce sector will spur demand for distribution hubs and warehouses to enable just-in-time delivery, reshoring and nearshoring to bring manufacturers closer to end-customers, efficient automation systems, and warehouse decentralisation.
“There is also strong demand for cold-storage warehouses on the back of the proliferation of online grocery startups,” Kenanga Research said.
The research house said its top pick for the sector is Westports on the back of its resilient earnings that are underpinned by long-term contracts with key clients, its long-term growth prospect driven by the Westports 2 expansion project, and its price competitiveness.
“We believe that Westports will be able to weather the challenging global trade outlook as a key beneficiary of trade diversion, while effectively managing its yards congestion issues by the significant hike in container storage charges that can withstand vessel-bunching from the Middle-East crisis.”
Overall, the research house said it expects the logistic sector’s growth to remain steady going into next year.
“We expect the domestic logistic sector’s growth to remain steady going into next year, which is a beneficiary of the boom eCommerce, supported by the global tech up-cycle led by artificial intelligence demand, a resilient US economy and potential trade diversion amid US-China trade tensions,” the research house said.