The World Trade Organisation projects the global merchandise trade volume to only inch up by 1% this year, down sharply from a 3.5% expansion in 2022.
“This does not augur well for seaport operators like Westports Holdings Bhd,” said Kenanga, which has placed a “market perform” call with a target price of RM3.65 on the counter.
The research house is slightly more optimistic about Bintulu Port Holdings Bhd’s prospects, citing the firm’s stable operation in the handling of liquid natural gas cargoes and a potential tariff hike at Bintulu Port.
“Stricter regulations on carbon emissions may pose new challenges to global trade, particularly, one from the United Nations’ International Maritime Organisation (IMO) and another from the European Union (EU),” it said.
Under the new IMO rules, effective from January, 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 being removed from service.
Kenanga added that the EU’s Carbon Border Adjustment Mechanism (CBAM) could disrupt the exports of certain commodities – such as iron and steel, cement, aluminium, fertiliser, electricity, hydrogen – to the EU.
During the transition period between October 2023 and December 2025, EU importers must report embedded emissions in goods imported on a quarterly basis as well as any carbon price paid in a third country.
When the CBAM takes full effect starting 2026, importers will need to buy carbon credits reflecting the emissions generated in producing them.
“While the exact implications of the IMO and CBAM regulations on the seaport and logistics sector remain unclear, the volume of containers heading to the EU will certainly be affected,” said Kenanga.
Around 18% of containers throughout the Asia-Europe trade could be affected, especially those originating from China, which is a major exporter of iron, steel and aluminium to the EU.
Domestic logistics shielded from headwinds
Whilst seaports are expected to struggle, Kenanga believes the local logistics sector will remain robust as it is domestically driven and riding on booming e-commerce.
“Industry experts project the local e-commerce gross merchandise volume to grow at a CAGR (compound annual growth rate) of 11% from 2022 to 2027, while its size could reach RM1.65 trillion by 2025 from RM1 trillion currently,” it said.
Demand for distribution hubs is expected to grow to facilitate just-in-time delivery, bringing manufacturers closer to end-customers and warehouse decentralisation.
This serves to reduce transportation costs and de-risk the supply chain.
Kenanga notes that there is strong demand for cold-storage warehouses in particular, due to the abundance of online grocery start-ups.
As such, Kenanga’s top picks for the sector is Swift Haulage Bhd owing to its “superb pre-tax profit margin of 10% compared to the industry average of 4%”.
The research house has an “outperform” rating on the counter, with a target price of RM1.00.
Its top pick in the seaports segment is Bintulu Port, with an “outperform” rating and a target price of RM6.00.
At noon break, Swift’s share price was up 1.05% or 0.5 sen at 48 sen, giving it a market capitalisation of RM422.66 million.
Bintulu Port’s last adjusted closing price was RM5.00, with a market capitalisation of RM2.3 billion.