| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The transportation and logistics sector has largely met expectations for the first nine months of the fiscal year, with key players demonstrating resilience driven by strategic cost efficiencies and favorable market conditions. While some companies faced headwinds, the overall sentiment remains positive, especially for entities poised to benefit from upcoming tariff adjustments and an improving global trade outlook.
Performance Review
Marine port operator Westports delivered strong 3Q25 results, with operational revenue surging by 9.7% quarter-on-quarter and 16.4% year-on-year, pushing 9M25 revenue to MYR1.9 billion. Core profit also saw significant growth, up 17.6% QoQ and 19.8% YoY in 3Q25, aligning with full-year estimates. This robust performance was primarily attributed to high restow requirements from empty container repositioning and the positive impact of a 15% tariff adjustment implemented in July.
Conversely, logistics player TASCO’s 2QFY26 results fell below expectations, mainly due to a higher-than-anticipated effective tax rate of 23.5%, compared to 17.5% in the prior quarter. Management anticipates a normalised ETR of approximately 20% moving forward. Meanwhile, FM Global Logistics reported a 1QFY26 core profit of MYR8 million, which was flat QoQ but up 13.6% YoY, meeting market estimates. Its performance was bolstered by a stronger product mix and a lower effective tax rate of 24.4%.
Outlook and Key Drivers
The outlook for Malaysia’s external sector is becoming more encouraging, supported by resilient global container demand, regional trade diversification, and Asia’s economic dynamism. RHB Economics forecasts a 9.3% export growth for 2026, driven by strong global and regional growth, US tariff policy developments, and robust E&E exports. Global GDP is projected to accelerate to 3.5-3.7% in 2026, up from 3.2-3.3% this year, further underpinning a positive trade environment.
Crucially, the sector anticipates further port tariff adjustments, with a second 10% hike scheduled for implementation in January 2026 at Port Klang. These sequential increases are expected to significantly uplift Westports’ earnings trajectory and provide clear revenue visibility. Gateway customers are particularly set to benefit, as their effective revenue from cargo rises proportionally due to existing percentage-based rebates tied to tariffs. However, transhipment rates, typically negotiated directly with shipping lines over several years, may not automatically reflect these gazetted tariff changes without renegotiation.
Investment Recommendation
Given the mixed performance and promising outlook, analysts maintain a “NEUTRAL” sector recommendation, with a preference for logistics players. TASCO has been highlighted as a “Top Pick” due to its diversified client base and business segments, which contribute to earnings stability. Additionally, integrated logistics services (ILS) tax incentives are expected to provide further cushioning against sector challenges.
