Malaysia’s seaports showcased strong growth though the sector’s earnings delivery saw a slight deterioration in 2QCY24 partially due to the Red Sea crisis that has caused yard congestion, and strict carbon regulations.
Analysts at Kenanga maintain their NEUTRAL stance on the sector in view of the disruption to global trade, especially in the Asia-Europe sector as operators have effected shipping diversion from the Red Sea.
On the local front, the core net profit of Bintulu Port Holdings Bhd (BIPORT) with a target price of RM6.55 almost doubled YoY driven by strong cargo volumes in both Bintulu Port due to the recovery in LNG demand from China and Samalaju Industrial Port from a pick-up in cargo volumes from key customers.
Meanwhile, Westports Holdings Bhd (WPRTS) saw a stronger top-line growth due to a stronger container volume with improved yields, mainly from robust gateway container volume in the 1QFY24. Its earnings rose significantly, thanks to a better mix skewed towards higher-margin gateway cargoes and lower finance costs.
Pos Malaysia Bhd (POS), on the other hand, demonstrated disappointing cost containment as its core net loss plunging further into the red. Its postal sales continued to be affected by slowdown in online shopping and in-house delivery, for instance, Shopee Express of Shopee.
Swift Haulage Bhd (SWIFT) disappointed as stronger top-line growth was negated by higher-than-expected start-up costs from its new warehouse in Westport and loss of operational scale at its container depot and freight forwarding businesses.
In April 2024, the World Trade Organisation (WTO) cut its projection for global merchandise trade volume growth in 2024 to 2.6% (from 3.3%), quoting lower water levels in Panama Canal due to an extreme drought that is disrupting the movement of shipping liners.
Also, the global trade will have to navigate stricter regulations on carbon emissions that may pose new challenges to global trade, particularly, one from the United Nations’ International Maritime Organization (IMO) and another from the European Union (EU).
Under the new IMO rules, effective January 2023, all ships must report their carbon intensity and will be rated accordingly. The ships must record a 2% annual improvement in their carbon intensity from 2023 through 2030 or face removal from service.
While the exact implications of the new regulations remain unclear, the volume of containers heading to the EU will certainly be affected especially those originating from China, which is a major exporter of iron, steel and aluminium to the EU.
