Ports and the logistics sector will benefit from route changes
PETALING JAYA: The ports and logistics sector is expected to see a gradual recovery thanks to the deployment of Covid-19 booster vaccines, the normalization of domestic and global economic activities and the effect of pent-up demand despite the setback in the Russian-Ukrainian War.
Kenanga Research noted that port operators like Westports Holdings Bhd were already seeing a recovery in their throughput volumes while enduring further variant outbreaks.
“The majority of ships calling at Westports facilities come from intra-Asian routes which have seen the easing of lockdowns and the resumption of commercial activity despite having to endure another outbreak of the new Omicron variant, especially among European countries,” he said in a report. .
While the Russian-Ukrainian war has somewhat delayed the resumption of the supply chain, some of the supply has been rerouted to safer intra-Asian routes. Based on these, the research firm is cautiously optimistic about 2022.
Regarding Westports’ RM10bil expansion plan, Kenanga Research said the plans were on track to meet future growth in trade volume, with full completion only by 2040.
The expansion is expected to double Westports capacity to 27 million twenty-foot equivalent units (TEUs) from 14 million TEUs.
“We view this investment as a very long-term game for the group, thus ruling out any accretive development in earnings over the next few years.
“The global supply chain is adjusting to a combination of factors, such as increased consumer demand for containerized goods in Western economies, the easing of lockdowns and a global supply chain adjustment adhering to measures of Covid-19,” he added.
However, the newly approved container terminal expansion project is currently awaiting approval by various bodies. On the single prosperity tax or “Cukai Makmur” at an effective tax rate of 33%, the research firm expects the port operator to bear the brunt of it in fiscal 2022.
As for logistics players like Pos Malaysia BhdKenanga Research said the company’s transformation strategy should bear fruit by the second half of the year.
“Pos Malaysia is facing limited profitability in its postal and courier business due to tight pricing and high operational costs.
“This is offset by stringent cost reduction measures and improved lead times from its logistics and aviation divisions by capitalizing on the freight management business, automotive-related businesses and the growing contribution of the aviation division of e-commerce warehousing, increased cargo tonnage handled (increased number of flights) and ground handling companies,” he said.
He noted that the company’s logistics and aviation divisions have seen a turnaround in their latest financial results.
The group continues its efforts to manage costs with targeted annual cost savings of RM24 million, he added.