Recovery of transportation & logistics sector varies among different segments

AmInvestment pointed that the sector was recovering with the reopening of the economy both locally and globally.

''The recovery of global trade augurs well for the port segment. However, the air travel industry faces a bumpy path given the uncertainties surrounding the opening of borders and recapitalisation plans of airlines.

''While the logistics segment is technically a beneficiary of the pandemic (particularly, parcel delivery on the back of the booming online shopping), it is weighed down by a crowded playing field with cut-throat competition,'' it said in a report today.

AmInvestment, which kept its ''underweight'' call on the sector, said the global economic recovery would translate into more robust global trade, and hence higher throughput at the seaports.

Over the longer term, the outlook for ports in the region including Malaysia remains resilient. This will be underpinned by rising investment in the manufacturing sector that generates tremendous inbound (feedstock) and outbound (finished product) throughput for ports.

AmInvestment expects project container throughput at Westports Holdings Bhd and the ports of MMC Corp Bhd to bounce back by 10 per cent and eight per cent respectively in financial year 2021 (FY21) and return to the pre-pandemic levels in FY22.

The firm said there had been green shoots of recovery in the air travel industry, as indicated in the increase in global daily commercial flights since April 2020 as tracked by real-time flight tracker on the back of the easing in travel restrictions globally.

However, the flights were still at only about 40 per cent as at end of June this year of the level registered at the same time last year.

The firm expects passenger volume for AirAsia Group Bhd to rebound by 35 per cent in FY21 after shrinking by 50 per cent in 2020.

This is in line with the Malaysian Aviation Commission's projection of 49–50 per cent contraction in Malaysia's air traffic passengers in FY20.

On the logistic sector, AmInvestment believes the parcel delivery segment was a winner of the current situation as the pandemic and the resultant social distancing had accelerated the change in shopping habits of consumers from physical to online channels.

However, it said the sector had low entry barriers.

A crowded playing field, with 111 players as at June this year, has given rise to cut-throat competition resulting in severe squeeze in margins.

''We believe the overcrowded situation could get worse in the short to medium term given more new entrants funded by venture capitalists who want to jump on the bandwagon of the e-commerce boom.

AmInvestment's top pick within the sector is MMC Corp.

''We see MMC Corp as a recovery play given the expected improvement in its port throughput over the next six to 12 months as economies reopen.

''We see value in MMC Corp with its port business being valued at 12 times forward price per earning on a stand-alone basis,'' it added.