• Top Picks: Malaysia Airports (MAHB) and TASCO. We pick MAHBbased on the salient recovery of international tourism from 4Q23 onwards,driven by China’s outbound tourism recovery and resumption of airlinecapacities. Within the logistics sector, we prefer TASCO for its diversifiedclient base and business segments that will sustain its earnings base, aswell as the integrated logistics services tax incentives that offer a bufferagainst sector headwinds. We remain NEUTRAL on the sector.

• Cautious about trade performance in 4Q23. With export and importmomentum slowing down in July and August, RHB Economics is nowexpecting a delayed recovery in the country’s trade performance. There isalso a possibility of YoY exports contraction extending into 4Q23 (4Q23Fnet exports: -2.4% YoY). The downside risks are mainly hinged on China’sprolonged weakness and the global technology’s down cycle. On the brightside, we anticipate a gradual improvement towards end-4Q23, supportedby the strength in the US economy and recovery of regional economies(ASEAN). The full-year export projection stands at -9.4% YoY while netexports forecast is -0.6% YoY.

• Tourism entering peak season. As we approach the year-end, we expectdomestic and international tourism to further pick-up in tandem with thefestive season in Malaysia and Turkiye. This would benefit the aviationindustry, as well as airport operators like MAHB. We are positive on thepotential recovery in visitor footfall in 4Q23, especially from China – as thecountry accounted for the second highest number of inbound tourists forMalaysia in 2019. While China’s outbound tourism is still lagging comparedto its domestic tourism, we are positive that international tourism willimprove in 4Q23, based on China’s encouraging recovery trend (Fig 7).

• Courier industry outlook remains despairing. The intense pricingcompetition following the rise of online market players continues to tauntand erode the profitability of courier companies. We believe stricterregulations and the imposition of minimum pricing per parcel are requiredto lift the sentiment within the sector. While the Government has expressedits commitment to address the operating costs and uncompetitive behaviour– with the aim of meeting the e-commerce industry’s growth target ofreaching 30 packages per capita by 2025 – we have yet to see any impactfulmeasures or conclusive initiatives announced.

• Downside risks to our sector outlook include a resurgence of newCOVID-19 variants that could lead to more lockdowns, continued slowdownin global economic growth which will paralyse trade flows further, slowerthan-expected recovery in passenger and trade volumes, and a furtherweakening of freight rates. The opposites constitute upside risks.

Source: RHB Securities Research - 3 Oct 2023