KUALA LUMPUR (Sept 8): Kenanga Research has maintained its "neutral" stance on the logistics sector, naming Bintulu Port Holdings Bhd and Swift Haulage Bhd as its top picks.
Notwithstanding challenges in global trade due to economic uncertainty and stricter carbon emission regulations, the sector is set to benefit from the local e-commerce boom, with industry experts forecasting 7% annual growth in merchandise volume from 2023 to 2027, the research firm said.
Kenanga said booming e-commerce will drive demand for distribution centres and warehouses to enable just-in-time deliveries, efficient automation systems, including networking with the customer system, and decentralisation of warehouses to lower transportation costs and reduce supply chain risk.
In addition, there is also strong demand for cold storage due to the proliferation of online grocery startups, the firm said in a statement on Friday.
Kenanga rates both Bintulu Port and Swift Haulage as "outperform" with a target price of RM5.55 for Bintulu Port and 87 sen for Swift Haulage.
Kenanga favours Bintulu Port due to its steady income stream from handling liquefied natural gas (LNG) cargoes for Malaysia LNG Sdn Bhd (which typically accounts for nearly 50% of its earnings), potential earnings growth if Bintulu Port is granted a significant increase in its port tariffs, and Samalaju Industrial Port's huge growth potential supported by increasing investment in heavy industries at Samalaju Industrial Park.
“[We like] Swift for its leading position in the Malaysian haulage business commanding close to 10% market share; its value-added integrated offerings resulting in a superb pre-tax profit margin of 10% compared to industry average of 4%, and the tremendous growth potential of its warehousing business, riding on the booming domestic e-commerce,” Kenanga added.
At the time of writing on Friday, Bintulu Port’s share price was unchanged at RM5.10, with a market value of RM2.35 billion, while Swift Haulage slipped 1.03% to 48 sen, valuing it at RM427.11 million.