RHB Research said the airport operator is set to gain from passenger movements and changes to the passenger service charges, loss capitalisation mechanism and new operating agreement with the government, all of which are due in the second quarter of this year.
PETALING JAYA: RHB Research favours Malaysia Airports Holdings Bhd
(MAHB) and versatile third-party logistic providers like Tasco Bhd to gain from China’s border opening due to their inherent trends and strengths in the sector.
The research house has a “buy” call on MAHB on expectations the airport operator is set to gain from passenger movements and changes made to the passenger service charges, loss capitalisation mechanism and new operating agreement with the government, all which are due in the second quarter of this year (2Q23).
“We see encouraging initiatives by the government and MAHB to increase Malaysia’s visibility as a travel destination to meet the target of five million tourist arrivals from China in 2023,” the research outfit said in a report on the transportation sector which it has a “neutral” call on.
It also advised investors to wait and see what policies are announced by the government to foster a more even playing field for courier service providers when dealing with eCommerce marketplace players.
Currently, sellers using online marketplaces that are unable to select their preferred courier and parcels would eventually be mostly assigned to an in-house logistics provider, which has led to an environment of unfair competition, with logistics providers struggling to make profits.
“We look forward to announcements of government initiatives in 2Q23 to foster a more even playing field for the courier providers.
“Such measures may include imposing minimum pricing per parcel and introducing stricter policies and regulations,” RHB Research said.
The research house noted air freight rates have come off their peak last year and the market remains competitive due to high jet fuel prices, fuelled by demand for travel.
Ocean freight rates also have flattened out but could be supported by the revival of China’s economy will lift trade flows within the Asia-Pacific region and benefit Malaysian port operators like Westports Holdings Bhd.
RHB Research however advised investors to choose well-strategised service providers within the transportation sector.
Apart from MAHB, it likes Tasco for its strong global presence, which allows the company to expand into the fourth-party logistics business, handling the entire supply chain management for its key client.
“In view of freight rate normalisation, earnings would be cushioned by its ability to lock in ocean freight rates with its customers and to negotiate with shipping lines for better margins and volume certainty,” RHB Research said, adding that this would help provide earnings visibility to Tasco.It added that Tasco’s well-diversified business model with strengths in the contract logistics and cold chain segments, coupled with the Integrated logistics solutions tax incentive, should sustain its overall profitability.
RHB Research has a target price (TP) of RM1.86 a share on Tasco and RM8.28 for MAHB. It is neutral on Westports with a TP of RM3.78 a share.
