In a note today, MIDF Research said its optimism was due to the relatively recent ratification of the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreements.

Malaysia successfully ratified the RCEP on Jan 17, 2022, and the CPTPP on Sept 30, 2022. Subsequently, the RCEP came into force on March 18, 2022, while the CPTPP took effect on Nov 29, 2022.

Following these developments, it has upgraded its call on the sector from “neutral” to “positive”.

MIDF Research noted that the prospects for logistics companies under its coverage look slightly better compared to port operators due to the former’s “fewer foreseeable downside risks”.

“This preference is supported by the sector’s appealing valuation, currently at a substantial discount of 40%-50% below historical norms,” it added.

Furthermore, MIDF Research said that logistics firms no longer face uncertainties regarding fuel costs as they are still able to retain their access to subsidised diesel, as announced in Budget 2024.

Meanwhile, it has chartered a bullish perspective on port operators, especially those that are focused on transshipment such as Westports Holdings Bhd.

It has placed a “buy” call on the group with a target price (TP) of RM3.90.

The research house noted that Westports currently dominate the Port Klang market with an impressive 80% market share.

A total of 70% of its business there is focused on transshipment while the remaining 30% is dedicated to gateway operations for imports and exports.

For the financial period ended June 30, 2023, (Q2 FY2023), Westports registered a net profit of RM194.8 million, increasing 20% year-on-year from RM162.3 million.

As at 4.44pm, Westports’s share price was up by one sen (0.3%) at RM3.29, giving it a market capitalisation of RM11.25 billion.