Logistics companies’ results meet expectations

RHB Research maintained a “neutral” call on the transportation sector. — Bloomberg

PETALING JAYA: The financial results of logistic service providers for the second quarter of 2023 (2Q23) were mostly in line with estimates, says RHB Research.

Despite prolonged weakness in trade flows and soft Malaysia trade data in 2Q23, the research house said FM Global Logistics Holdings Bhd, Westports Holdings Bhd and Tasco Bhd posted earnings in line with expectations.

Nevertheless, RHB Research’s top picks for the transportation sector are Malaysia Airports Holdings Bhd (MAHB) and Tasco.

For Westports, RHB Research noted the group’s container throughput exceeded management’s low single-digit guidance and registered an 8% increase year-on-year (y-o-y) in 2Q23. This was partly driven by higher-than-expected empties, which was 29% of the total 20-ft equivalent units.

“Despite China’s recent disappointing economic data, management thinks that the repositioning of empties could indicate early signs of revival in China’s manufacturing activities,” the research house said in a report yesterday.

RHB Research added Westports should see a lower ratio of empties in its second half 2023 (2H23) container volume as most of the empties are already channelled back to China and the y-o-y growth would be flattish due to the high base.

“We still expect container volume throughput to grow by single digits y-o-y in 2023,” the research house said.

Meanwhile, robust passenger traffic and the further resumption of airline services in 2Q23 supported MAHB’s earnings for the quarter.

RHB Research said while MAHB’s 1H23 earnings were at 38% and 42% of its and the street’s full-year projections, the research house expects MAHB’s revenue and earnings to catch up in 2H23.

“This is in tandem with the peak travelling season (especially in Turkiye) and pick-up in the number of inbound tourists from China to support Malaysian operations.

“The Malaysian Aviation Commission’s Third Consultation Paper and MAHB’s new operating agreement with the government could be finalised in 2H23,” RHB Research said.

Meanwhile, FM Global’s results for the financial year 2023 (FY23) were in line despite prolonged weakness in all segments.

On the other hand, Tasco’s earnings in 1Q24 were at 15% and 16% of both RHB Research’s and consensus full-year forecasts.

Given that 1Q24 is a seasonally weaker quarter for Tasco, the research house still regarded the group’s performance for that period to be in line with expectations.

“The slower-than-expected shipment volume growth from the lack of activities was underpinned by the country’s weak trade data for 2Q23. We expect freight forwarding businesses to still see headwinds, as capacity (air cargo belly and ocean vessels) continues to grow while demand remains subdued.

“On a brighter note, FM Global and Tasco’s third-party logistics businesses, which is warehousing, should continue to cushion group earnings, mitigating the downside from the international business unit,” the research house said.

Elsewhere, GDEX Bhd missed expectations with its 2Q23 results when the group’s net loss more than doubled quarter-on-quarter and y-o-y to RM11.9mil. RHB Research said challenges within the last-mile delivery space may continue to persist.

“Margins will likely remain under pressure due to ongoing price wars, while demand softens as a result of physical retail businesses resuming operations,” the research house said.

RHB Research maintained a “neutral” call on the transportation sector with a target price of RM8.70 and RM1.70 for MAHB and Tasco, respectively.

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