Westports leads volume growth. Despite the slowdown in global economy, we view that major domestic ports are expected to register better container volume growth this year. This is due to the growing intra-Asia trade lanes as well as trade diversion from the US-China trade war. We estimate Westports to lead the FY19 container throughput volume growth of c.10% yoy followed by Port Tanjung Pelepas (PTP) c.3% yoy (refer table 1). For 9M19, we gather from industry sources that Westports has achieved total volume of circa 8m TEUs – on track to meet our new forecast of 10.5m TEUs for this year. Meanwhile PTP (70%-owned by MMC Corp) is believed to have garnered 6.7m TEUs for 9M19, and is likely to beat 2018’s 9.0m TEUs. However, we understand that Northport container volume may show decline due to relocation of some customers to Westports.
Ports remain resilient despite global economic slowdown. The International Monetary Fund (IMF) in its World Economic Outlook July update, downgraded the global GDP growth from 3.3% to 3.2% with a related decrease in trade volume growth from 3.4% to 2.5%. Accordingly, Alphaliner have revised downwards its growth outlook for global container throughput to 2.5% in 2019 (from 3.5%). Global economic downturn has also led the World Bank to project that developing East Asia Pacific (EAP) growth to soften to 5.9% in 2020. Nevertheless, outlook for South Asia is strong with growth anticipated at 7% in 2020 and 7.1% in 2021. This bodes well for the region and implies growth in cargo volume for countries therein. From this development, ports in Malaysia are expected to benefit from the intra-Asia trade lane growth and exhibit resilience in the face of current global economic slowdown.
Long term benefit from better infrastructure initiatives. The National Transportation Policy (NTP 2019) and Budget 2020’s allocation would see government efforts to improve the country’s transportation ecosystem and network. The aim of turning Port Klang into a regional maritime centre and logistics hub would see the government undertake an in-depth study on the development of Pulau Carey. In our view, all these initiatives would be positive for port operators as better connectivity could lead to higher efficiency and greater competitive advantage against ports in other countries, but the impact could be protracted. As to Pulau Carey project, we do not view this measure as a direct threat to Westports as they have a strong relationship and impeccable track record with major shipping liners.
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