Kenanga Neutral On Seaport And Logistics Sector After Mixed 1Q Results
Kenanga Investment Bank has reiterated its 'Neutral' stance on Malaysia's seaport and logistics sector following a mixed set of corporate earnings in the first quarter of 2025 (1QCY25), coupled with mounting global trade challenges.
In its sector update, Kenanga noted that half of the companies under its coverage met expectations, while the other half underperformed. None beat forecasts, marking a deterioration from the previous quarter, where 25% exceeded estimates.
Key Highlights:
WPRTS (Westports Holdings Bhd) and POS Malaysia met expectations.
Bintulu Port Holdings (BIPORT) and SWIFT Haulage disappointed.
The sector was impacted by factors including irrational price competition in logistics, shifting global shipping alliances, and technical issues at LNG facilities.
Company-Level Performance
Westports Holdings (WPRTS) delivered results in line with expectations, supported by higher contributions from value-added and restow services linked to the Gemini Cooperation and Ocean Alliance. Despite softer container volume growth, the company expects value-added services to offset the decline.
POS Malaysia's losses were anticipated, with some recovery in parcel and logistics volumes. However, the performance was dragged down by marine maintenance costs. The aviation segment, meanwhile, benefited from strong air freight demand.
BIPORT underperformed due to reduced LNG production at the MLNG complex and a higher tax rate. Its 2QFY25 is expected to be weak due to a planned shutdown, although recovery is expected in 2HFY25.
SWIFT Haulage posted disappointing results, pressured by startup costs for a new warehouse, loss of operational scale, and pricing pressures. The company saw margin compression despite gains in its freight forwarding segment, especially on long-haul routes.
Global Headwinds and Local Resilience
Kenanga cited trade disruptions from Red Sea diversions and geopolitical tensions as key headwinds. Global trade growth is projected to decline by 0.2% in 2025, revised down from +3.0% by the WTO, with only a modest recovery anticipated in 2026.
However, Malaysia's external trade remains resilient, posting a RM12.6 billion surplus as of February 2025. Growth was supported by booming e-commerce, the global tech up-cycle (particularly AI-related demand), and frontloading activities amid US-China tariff negotiations.
Emerging economies like Malaysia are also benefiting from trade diversion, positioning themselves as connecting economies between geopolitical blocs.
Regulatory Risks on the Horizon
Kenanga cautioned about upcoming carbon emissions regulations by the IMO and the EU's Carbon Border Adjustment Mechanism (CBAM), which could impact container volumes, especially on Asia-Europe routes.
'While the exact impact remains uncertain, containers bound for the EU—particularly those from China—will likely be affected,' the report stated. EU-bound trade makes up roughly 18% of container throughput in Asia-Europe lanes.
E-Commerce to Fuel Domestic Logistics
Kenanga remains constructive on the domestic third-party logistics (3PL) space, driven by Malaysia's e-commerce boom. The sector is expected to grow at a 7% CAGR from 2023 to 2027, reaching RM1.9 trillion.
Growth drivers include just-in-time (JIT) delivery, reshoring, warehouse decentralisation, and cold-storage demand due to online grocery platforms.
Despite global trade headwinds, Kenanga said Malaysia's logistics sector remains supported by structural growth trends and resilient export activity. The house, however, maintains a 'Neutral' outlook on the sector and does not name any top pick at this time.
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