Long road to recovery for transport and logistics, says Affin HWang

KUALA LUMPUR: Business volumes in the aviation and port sectors are expected to see an improvement in the second half of the year but may not return to pre-Covid-19 levels even next year, says Affin Hwang Capital research.

Following a virtual conference which saw the participation of five transport and logistics players, the research house said the presentations reinforced its "underweight" view on the sector. "We concur with Malaysian Airports Holdings Bhd (MAHB MK, RM5.65, Sell) and Westports Holdings Bhd' view that business volume will recover from the 2Q20 low, but is unlikely to return to pre-Covid-19 levels within 2H20/2021. "We continue to avoid the aviation sector due to the difficult business environment," it said.

The research house maintained its "hold" rating on Westports with a target price of RM3.70. "while its container volumes are affected by weaker economic activity, the fall is not as severe, and Westports has a robust balance sheet to weather the downturn," it said. According to Affin Hwang, MAHB is hopeful that passenger movements can revert to pre-Covid-19 levels by late-2021/2022.

The airport operator's passenger movements declined 54% year-on-year over the first five months of 2020. In response to the crisis, it has established a comprehensive plan to strengthen its financial position and expects its Turkish operations to recover slightly better Malaysia's. In port operations, Westports expects its monthly container volume to be lower year-on-year in 2H20 although the decline may not be as steep as in 2Q20.

Meanwhile, MMC has deferred and lowered its capex to ease the cashflow impact from Covid-19. Pos Malaysia and GD Express saw higher parcel volumes in April-May 2020. According to GD Express, the parcel volume was 10% to 15% higher than normal levels while Pos saw a 52% quarter-on-quarter increase in average daily parcel volume in May.

While Pos expects the trend to continue throughout 2020, GD Express said it is too early to tell of the higher volumes are sustainable.

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