KUALA LUMPUR: AmInvestment Research upgraded its call on the transportation & logistics sector to Neutral from Underweight with MMC Corporation (Buy, FV RM1.56) and Westports (Buy, FV RM4.45), as top picks.
To ride on the recovery in the air travel segment, the research house said on Thursday it prefers airport operator Malaysia Airports (Buy, FV RM6.64) to airline AirAsia (Sell, FV 44 sen).
AmInvest Research pointed out it is a foregone conclusion that AirAsia will have to raise a significant amount of fresh capital to patch up the damaged balance sheet, which will be highly dilutive to existing shareholders.
In it report, it said the seaport segment has embarked on a firm and sustainable recovery path.
The recovery is underpinned by the reopening of economy globally and a seemingly decent peak year-end holiday season, as evidenced in the record high Shanghai Containerised Freight Index (SCFI), often used to gauge the health of global trade, which shows the strong demand for container capacity.
As for the logistics segment, it continues to benefit from a surge in e-commerce demand fuelled by the pandemic.
The air travel industry, however, is still in a survival mode, suffering from a cash crunch and cross-border travelling restrictions.
As for ports, it is keeping our view that the seaport sector, locally and in the region, has seen the worst, and is on its recovery path as global economies reopen.
“We believe the pandemic (as well as the increased trade tensions between major economies in the world prior to the pandemic) will reshape the global supply chain, resulting in diversion of investments away from China to the Southeast Asian region, boosting container throughput in the region, ” it said.
On the logistics sector, it said the parcel delivery segment will continue to be the winner from the pandemic as consumers shift their shopping habits from physical stores to online channels, boosting the demand for parcels delivery.
However, the crowded sector locally continues to be weighed down by the cut-throat competition, resulting in severe squeeze in margins.
“We believe the logistics players will continue to focus on improving their service level and operational efficiencies to gain market shares and improve margins, which is critical for the players to survive in the overcrowded space, and eventually benefit from the e-commerce boom.
“Our top pick within the sector is MMC Corporation and Westports as we anticipate the recovery in container throughput over the next six to 12 months, ” it said.
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