RHB Investment Bank Bhd (RHB Research) has maintained a NEUTRAL stance on the transportation sector despite some mixed results in the third quarter of 2024 (3Q24). The research house highlighted Tasco Bhd as its top pick within the sector, noting its diversified client base and business segments that help maintain earnings stability.
RHB Research's sector review showed that results for Malaysia Airports Bhd (MAHB) came in line with both the house's and market expectations. For 9M24, MAHB's revenue grew 20% year-on-year (YoY) to RM4.3 billion, benefitting from an ongoing recovery in air traffic, particularly with a higher international passenger mix, which led to an increase in passenger service charges and retail spending. As a result, 9M24 core earnings surged by 72% YoY to RM592 million. However, RHB Research revised its Malaysia passenger traffic forecast down to 95.2 million for 2024, acknowledging that its previous estimate of 105.9 million was too optimistic.
Westports Holdings Bhd, a marine port player, posted stronger-than-expected results for 3Q24, with a core net profit of RM228 million, up 11.8% quarter-on-quarter and 16.5% YoY. Its 9M24 earnings amounted to RM636 million, 77% of full-year forecasts, surpassing expectations. This positive deviation was attributed to lower-than-expected operating expenses and higher-than-expected rental revenue. Following these results, the research house revised its earnings forecasts for FY24-FY26 upwards by 1%-3%, accounting for lower depreciation under the new concession agreement.
On the other hand, small-cap logistics players faced challenges, with FM Global Logistics Holdings Bhd's 1Q25 core net profit declining by 23% YoY to RM7 million, missing expectations. Similarly, Tasco's 1H25 core earnings were down 17% YoY to RM24.9 million, falling short of RHB Research's estimates. The weaker earnings were attributed to disappointing contributions from the freight forwarding segment.
Looking ahead, the house is positive on global demand for 2025, forecasting above-consensus GDP growth of 2% for the US and 4.8% for China. However, RHB Research remains cautious about potential trade impacts from US protectionist policies. The house is optimistic that Malaysia's air passenger traffic will continue to grow in 2025, supported by visa-free travel for Chinese tourists, e-gate immigration, and airport expansions in key locations. In logistics, DHL anticipates elevated freight rates due to potential US port strikes, tariffs, and ongoing disruptions in the Red Sea.
