• Maintain OVERWEIGHT; Top Picks: Malaysia Airports and TASCO. Of the four companies under our coverage that reported results – Westports exceeded expectations, MAHB came in line, while FM Global and TASCO fell below estimates. We like MAHB as an evident recovery play, and our preference for TASCO within the logistics sector is premised on its diversified client base and business segments that will sustain earnings base, and the Integrated Logistics Services (ILS) tax incentives that offer a buffer against sector headwinds.

• Westports ended the year with historical high volumes. Westports’ FY23 results exceeded ours (105%) and consensus' (104%) expectations marginally. The monthly container volumes handled by Westports in Dec 2023 were the highest ever – signalling a recovery in regional trade activities. The container throughput exceeded initial guidance of low single-digit growth, due to empty boxes repositioning in 1H23 and stronger gateway TEUs in 2H23, especially in December. Nevertheless, 4Q23 container revenue was relatively stable (+5% YoY) despite an 11% increase in container volume due to much lower VAS contribution and storage charges.

• MAHB exhibits recovery momentum in both aeronautical and nonaeronautical segments. FY23 performance met ours (100.4%) but surpassed Street's (115%) estimates. The stronger YoY performance was not a surprise to us, given the concurrent growths in passenger traffic and recovery rates. Jan-24 traffic data also points to another new high (102% of 2019 levels) – in line with our view of full recovery expectations in 2024. Regulatory clarity remains uncertain as the 2019 OA approaches expiration, pending government consideration of aeronautical charges appeals. We anticipate the resolution of aeronautical charges would inject new growth catalysts for MAHB's earnings visibility going forward.

• Logistics players disappointed. FM Global’s 1HFY24 (Jun) results were slightly below expectations at 44% of our FY24F forecast. The sluggish quarterly performance was dampened by the weak domestic and global economies, higher staff costs, and lower volumes due to keener competition. TASCO’s 9MFY24 earnings were also below expectations, at only 58% of ours and consensus’ estimates due to weaker freight environment and slower trade activities. However, we expect TASCO to book stronger numbers ahead – supported by recovery in trade activities, sector tailwinds, contributions from new warehouses, and recognition of tax incentives.

• Outlook. Looking forward, RHB Economics reiterates its sanguine view of Malaysia's trade outlook for 2024, buoyed by the resilience of the global and regional economies, the global technology cycle rebound, and positive economic dynamics of China. January's exports and imports rebounded 8.7% and 18.8% YoY, stronger than market consensus estimates of 3% and 8% YoY. We expect this to benefit Westports and logistics players like TASCO and FM Global.

Source: RHB Securities Research - 11 Mar 2024