Transport sector to sustain prospects on high demand

PETALING JAYA: The transportation sector is expected to sustain favourable prospects, going forward, underpinned by the increase in demand for the transportation of goods via air and land.

MIDF Research’s top picks among logistics companies are Swift Haulage Bhd and Tasco Bhd.

The research house said Swift is able to leverage the positive trade outlook, given its 9% market share in the container haulage business (handling transportation to and from the ports).

“Furthermore, Swift has expanded its fleet by adding 50 prime movers last year, positioning them well to capture the anticipated growth in land transportation volume,” it said in a report yesterday.

MIDF Research noted that Tasco’s strong position in the freight forwarding business is further strengthened by its close association with its immediate holding company, Yusen Logistics Co Ltd. The latter is a prominent air freight forwarder in Japan.

“Our preference for Tasco is driven by its substantial electrical and electronics customer base (contributing more than 20% to revenue), including a major client in the semiconductor manufacturing sector, which is a key driver of local exports,” the research house said.

MIDF Research added that the expected rise in demand for goods could partially stabilise market freight rates, especially as more vessel capacity is expected to come onstream.

“Stable rates are expected to improve earnings visibility for freight forwarders, marking a shift away from fluctuating short-term agreements in the past.

“Meanwhile, increased goods production and trade activities are expected to boost occupancy rates for warehouse space,” the research house said.

The World Trade Organisation (WTO) has lowered its projection for the growth of worldwide merchandise trade this year, from 1.7% to 0.8%. Although merchandise trade volume registered a 0.5% year-on-year decline in the first half of 2023 (1H23), a modest pick-up is anticipated for 2H23.

“Looking ahead, we foresee a brighter outlook for port players primarily focused on transshipment operations, such as Westports Holdings Bhd.

“This outlook aligns with WTO’s projection of a 3.3% annual growth in global merchandise trade for 2024, with potential for further growth if inflation subsides rapidly,” MIDF Research said.

For Westports, the reopening of China was not expected to significantly influence the recovery of the company’s trans-shipment business.

The main challenge here is due to demand rather than production, said MIDF Research.

“With the expectation that major economies will refrain from further tightening of monetary policies, there exists the potential for an improvement in consumption patterns and a subsequent increase in interregional container movements.

“Additionally, the rebound in port throughput is expected to receive additional support from gateway operations, with Malaysia’s exports and imports expected to grow in 2024, rebounding from declines in 2023,” the research house said.