Time to sail into Malaysian ports

KUALA LUMPUR: Malaysia’s ports are expected to be a bright spot for the logistics sector in 2020 as container throughput is forecast to remain on an upward trajectory.

Container throughput at Malaysia’s seaports has increased amid a growth in trade. For the cumulative nine months ended Sept 30, 2019, Westports Holdings Bhd — which manages Port Klang and Port of Tanjung Pelepas (PTP) — recorded 15.7% and 3% year-on-year increases in throughput respectively — on the back of electronics and electrical exports that are normally transported via airfreight.

“We opine that seaborne trade which transports capital goods, textiles and footwear will remain resilient compared to air trade, in line with DHL’s Global Trade Barometer,” said MIDF Research.

Furthermore, the implementation of the International Maritime Organization’s (IMO) sulphur cap this year is expected to drive transhipment volumes, especially at PTP as shipping liners will want to mitigate higher operating expenses from more expensive fuel.

According to AmInvestment Bank, Malaysia’s port sector is set to be resilient as global trade and investments in the manufacturing sector will generate “tremendous inbound (feedstock) and outbound (finished product) throughput for ports”.

It noted that Malaysian seaports have a competitive advantage of low port charges, underscored by a weak ringgit — a significant edge as global shipping companies are set to cut costs amid a global economic slowdown, coupled with the IMO’s sulphur regulations that came into effect on Jan 1, 2020.

AmInvestment expects local ports to expand their capacity and facilities. PTP will set up a new liquid bulk jetty and eight new container terminals (CT10 to CT17), doubling its handling capacity from 14 million to 28 million twenty-foot equivalent units by 2040. PTP will also have new triple-E cranes and develop autonomous driving terminal tractors as well.

TA Securities Research projects crude oil prices to be firmer in 2020 at around US$70 (RM283.50) barrel, with the ringgit averaging RM4.10 to the greenback from RM4.15 in 2019, given the interest rate outlook for Malaysia and the US, as well as the continuing US-China trade war and US presidential election.

As such, Westports could benefit from stable oil prices as it is exposed to the vagaries of oil prices which account for 15% of its operating expenditure. The stock ended last Friday at RM4.11.

MMC Corp Bhd, on which MIDF has a “buy” call and target price of RM1.30, is the research house’s top pick for the sector as its stable of ports controls more than 50% of container market share in Malaysia. MIDF also likes the strength of MMC’s listed associate companies, such as Gas Malaysia Bhd and Malakoff Corp Bhd. MMC closed last Friday at 99 sen.

For AmInvestment, its top sector picks are Westports (fair value [FV]: RM4.81) and MMC (“buy” call; FV: RM1.58).

“We believe the seaport operators are beneficiaries of the trade diversion from the US-China trade war. Also helping is the resilient outlook for the region’s port sector, underpinned by investments in the manufacturing sector that generate tremendous inbound and outbound throughput, coupled with a weak currency and cheaper port charges,” opined the research house.