KUALA LUMPUR (Sept 10): RHB Research downgraded the Malaysian transportation sector from ‘overweight’ to a ‘neutral’ call, as key players Malaysia Airports Holdings Bhd (KL:AIRPORT) and Westports Holdings Bhd (KL:WPRTS) hit fair valuations, signalling limited upside.

Despite Tasco Bhd’s (KL:TASCO) core net profit dropping 25% year-on-year (y-o-y) to RM10.6 million for the first quarter ended June 30, 2024 (1QFY2025), due to weaker contract logistics and air freight performance, the research house in a note maintained its ‘buy’ call on the stock, with a target price of RM1.15.

“Within the logistics sector, we stay positive on Tasco, which remains as our top pick, due to its prospects for the year and ahead - mainly its diversified client base and business segments that will sustain its earnings base, and the integrated logistics services (ILS) tax incentive,” the house said.

RHB expects a rebound, driven by a recovery in the freight forwarding segment, new warehouse contributions, and tax credits from the ILS incentive. 

Besides, the ILS provider’s diversified client base and business segments are seen as key to sustaining its earnings moving forward.

On the other hand, MAHB reported a strong core profit for the first half ended June 30, 2024 (1HFY2024), up 74% y-o-y, benefiting from the ongoing recovery in international passenger traffic. However, MAHB’s share price is nearing its privatisation offer price of RM11, limiting further growth potential, according to RHB.

Meanwhile, Westports’ 1HFY2024 earnings rose 7.9% y-o-y, but lower yard utilisation could hinder optimal transhipment volumes.

The research house noted continued headwinds in the logistics sector, with ocean freight capacity shortages expected to persist until at least the 'Golden Week' holiday period from Oct 1 to 7.

“For the logistics segment, global logistics provider DHL expects ocean freight capacity shortages to persist at least until the Golden Week, while the air cargo industry expects a strong peak season due to holiday demand, with capacity pressure and higher rates anticipated,” the house said. 

https://www.theedgemarkets.com/node/726135