PETALING JAYA: RHB Research expects the strong performance of logistics stocks this year to continue, driven by a firmer sectoral two-year net profit compounded annual growth rate (CAGR) of 25%.
This compares to the sector’s CAGR of 15% over the past five years.
The research house said the performance of the sector, moving forward, would also be supported by the improved trade outlook for Malaysia and the accelerated growth of e-commerce in the country.
It noted that the stocks under its coverage have outperformed the market by an average of 35% year-to-date.
On the back of a strong export momentum, RHB’s economics team has lifted its 2017 export growth forecast for Malaysia to 10% from 6%.
“Despite the one-to-two quarters of time lag, domestic consumption should recover on the back of export-led gross domestic product growth. This should help support the improved online retail sales and drive parcel delivery volume growth,” it said in a note.
The research house said the recent quarter was a tepid quarter for the logistics sector, with Pos Malaysia Bhd, GD EXPRESS CARRIER BHD (GDex) and Freight Management Holdings Bhd underperforming its earnings expectations.
It noted, however, that Pos Malaysia’s first-quarter results missed expectations due to a higher effective tax rate, a one-off post-acquisition write-off at its logistics division, and deeper-than-expected losses at its postal services division.
As for GDex, earnings were impacted by weaker revenue and pre-tax losses at its logistics segment due to a decline in demand for warehousing services. Freight Management’s earnings, meanwhile, missed expectations due to larger-than-expected losses at its tug-and-barge operations.
RHB Research said the merchandise e-commerce trade currently accounted for less than 1% of the country’s total retail sales.
Lazada Malaysia remained the market leader in monthly web traffic, with 24 million visitors as at February 2017.
It saw gross merchandise volume grow 110% in 2016, and expects a similar growth trend in 2017.
According to online statistics, market research and business intelligence portal Statista, Malaysia’s e-commerce market is currently valued at US$1.1bil and is expected to expand at a CAGR of 23.2% between 2017 and 2021.
“We expect the government’s push for the Digital Free Trade Zone and increasing e-commerce retail sales to drive stronger handling volume and earnings growth for the logistics companies,” it said.
The research outfit said its top pick for the sector is Pos Malaysia for being an integrated logistics solutions provider and its market leadership in the domestic parcel delivery market.
“We have a ‘buy’ on Tasco Bhd and like the stock for its earnings growth trajectory and margin expansion post-completion of its acquisition of cold chain and warehousing operations,” it said.