Geopolitical risks, US tariffs cloud outlook for transport sector
KUALA LUMPUR: Geopolitical tensions from the Israel-Iran conflict and looming reciprocal tariffs from the United States are expected to weigh on the transportation sector, adding further uncertainty to global trade flows.
RHB Research said the escalation in the Israel-Iran conflict has heightened risks to global seaborne trade, particularly near key trade chokepoints such as the Suez Canal and the Strait of Hormuz.
It noted that traffic through the Suez Canal had already declined as shippers rerouted vessels around the Cape of Good Hope to avoid attacks by Houthi rebels, even before the conflict intensified.
"While the Strait of Hormuz remains open, we do not rule out the possibility of this passage being blocked if the war escalates further," the firm said in a note.
On sector performance, the firm said first-quarter 2025 results were generally in line, with Westports Holdings Bhd delivering results that accounted for 23 per cent and 24 per cent of its and the consensus' full-year forecasts, respectively.
However, logistics players underperformed. FM Global Logistics Holdings Bhd's third-quarter financial year 2025 earnings came in below expectations due to higher-than-expected operating costs, although its gross profit was in line with estimates.
With the exception of Westports, RHB Research said it is maintaining earnings forecasts for now, citing the fluidity of current developments.
"Our 'Neutral' sector weighting mainly reflects our 'Neutral' call on the sector heavyweight, Westports.
"Despite the upward earnings revision due to tariff hikes, this port counter is fairly valued, it is trading at its historical mean, with limited upside potential," it said.
Within logistics, RHB Research remains positive on Tasco Bhd, citing its diversified client base and business segments, which help sustain earnings.
The firm also noted that tax incentives for integrated logistics services offer a cushion against prevailing sector challenges.
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