Kenanga Research said it expects growth in the domestic logistics sector to remain steady going into next year.
PETALING JAYA: Malaysia’s logistics sector is poised for growth even amid the lower global trade volumes anticipated this year, analysts say.
Kenanga Research said it expects growth in the domestic logistics sector to remain steady going into next year.
Among the reasons for the sector’s resilience are the robust growth of eCommerce, a global tech upcycle led by demand for artificial intelligence, a resilient US economy, potential trade diversion due to US-China trade tensions, and a short-term surge in container volumes at domestic ports as international buyers rush to stock up during pauses on US tariffs, the research house noted.
In April, the World Trade Organization (WTO) cut its projection for this year’s global merchandise trade volume growth, expecting a decline of 0.2% (from a surge of 3%) due to a surge in tariffs and trade uncertainty, in addition to the potential escalation of Middle-East conflicts.
However, the WTO also projected a modest recovery next year of 2.5%.
“On the other hand, the domestic logistics sector fared better as Malaysia’s total trade soared 6.2%, with a trade surplus of RM46.9bil as of May, especially in the domestically driven third-party logistics sector due to the on-shoring trend, which is less vulnerable to external headwinds, while also being buoyed by the boom in eCommerce.
“Industry experts project the local gross merchandise volume in eCommerce to grow at a compound annual growth rate of 7% from 2023 to 2027, reaching 1.9 million tonnes by 2027 from 1.4 million tonnes in 2023,” the research house said.
Local players such as Swift Haulage Bhd
, however, face intense competition from Chinese players which limit local players’ ability to fully leverage Malaysia’s strong trade growth, Kenanga Research added.
The research house said trends to watch include the eCommerce boom spurring demand for distribution hubs and warehouses to enable just-in-time delivery, re-shoring and near-shoring to bring manufacturers closer to end-customers, automation, including interconnectivity with customer systems, and warehouse decentralisation to reduce transportation costs and secure supply chains.
There is also strong demand for cold-storage warehouses on the back of the proliferation of online grocery start-ups, it said.
Kenanga Research maintained its “neutral” stance on the sector.
Its top pick is Westports Holdings Bhd for its resilient earnings underpinned by long-term contracts with key clients such as the Ocean Alliance, its long-term growth prospect driven by the Westports 2 expansion project, and its price competitiveness due to lower transshipment tariffs versus peers such as Port of Tanjung Pelepas and Port of Singapore.
The research house recently upgrade the port operator to “outperform” as it believes that Westports would be able to weather the challenging global trade outlook by being a key beneficiary of trade diversion, while effectively managing its yard congestion issues by the significant hike in container-storage charges.
