According to industry analysts and operators, the main factor would be how long the quarantine efforts to combat the outbreak would last, as that would disrupt the ability of workers and operations of companies.
Westports Holdings Bhd group managing director Datuk Ruben Emir Gnanalingam told StarBiz that the impact from the Covid-19 outbreak in China was minimal for now.
“It really depends on how long this Covid-19 outbreak lasts. If it finishes soon, then there will be very minimal impact. But if let’s say it lasts until July or August then the impact is going to be quite large for us,” he said. “For now, we see a small impact only. We know now that quite a number of factories in China are closed and we will need to see when they reopen. Also, people are not going out very much and consumption is also very much impacted by this. Travel also stimulates a lot of consumption,” he added.
Ruben said that should everything resume to normal in China by March, then the company would be alright. But should the depressed conditions persist beyond that, then it will start to impact the company negatively.
CGS-CIMB Equities Research’s port analyst Raymond Yap told StarBiz that it is still too early to ascertain the impact of the recent Covid-19 outbreak on companies such as Westports.
While RHB Research’s transport analyst Alan Lim told StarBiz he is expecting some impact to cargo movements in February.
“We think that there will be an impact for TEU in the month of February. There will likely be a year-on-year decline or at best it will be flat,” Lim said.
In his latest earnings report published last week, RHB reduced its earnings forecast and target price to RM4.20 on Wesports but maintain its neutral call on the stock due to its decent dividend yield of 3.5%.
MIDF Research in a report last week said it expects only a minimal impact on container throughput at Malaysian ports particularly at Westports at this current juncture.
“This is despite the huge contribution from the intra-Asia segment contributing more than 50%. As such, we have slightly revised our financial year 2020 (FY20) annual container throughput growth for Westports to +2.5% year-on-year (yoy) from +3.3% yoy previously, which will be supported by our exports and GDP growth forecast of +1.5% yoy and +4.5% yoy respectively,” MIDF Research said.
“Our revised annual container throughput forecast is in line with the management’s guidance of a low single digit percentage for FY20,” it added.
MIDF Research further added that basing on what happened before, during the SARS epidemic, export-import container throughput at major Malaysian ports (Penang and Tanjung Pelepas) were not impacted by the SARS in 2003.
“Nevertheless, we must note that the 2003 SARS outbreak was in the absence of a city lockdown and the trade tariffs imposed by the US on goods from China,” MIDF said.
MIDF said the other influence China has on global trade is that its share of the global economy has more than doubled from 2003.
The research house also noted that the outbreak coincided with the Chinese New Year festival where factories and businesses were shut down for at least two weeks.
“However, a further extension of the factory shutdown could disrupt production up to two months,” it said.
The share price of Westport, the biggest public listed port in Malaysia, has fallen by 7.36% year-to-date and closed yesterday at RM3.90, adding 1 sen from the day prior.
MMC Corp Bhd, which has port operations, has seen a decline of 8.12% year-to-date, closing unchanged at 91 sen yesterday.
MIDF Research noted that according to Alphaliner, weekly container vessel calls at key Chinese ports have shown a reduction of over 20% since Jan 20.
“The number of ship calls at the seven ports in Yangtze River fell to 225 in Jan 2020 from 446 in Dec 2020. Chenglingji, a major feedering hub to the south of Wuhan, experienced the largest decline of more than 50%, with 177 fewer calls,” it said.
“If the Covid-19 could not be contained, port operations will be disrupted as ports will need to implement new safety procedures. In the most extreme scenario, there is the risk of quarantines at ports, which will inhibit the efficiency of port operations,” MIDF Research added.
Fitch Ratings in a report at the end of last week said some ports in the Asia Pacific Region will be affected if the slowdown in trade from China is prolonged.
It said that global ports will see reduced trade volumes as a result of Covid-19 which would become more severe should production in China take time to recover to pre-epidemic levels.