Budget 2020 had minimal impact on the transport

KUALA LUMPUR (Oct 15): Budget 2020 has had minimal impact on the transport and logistics sector, according to Affin Hwang Capital Research.

The research house said plans to develop Port Klang bode well for the Westports 2 project, as the port is expected to reach its full capacity in five years.

Westports Holdings Bhd is in the midst of finalising the detailed plans for its massive expansion project, Westports2, which should near double its capacity to 27 million TEUs(from 14 million TEUs currently), Affin Hwang added.

“We expect the project to receive the government’s green light ahead of the Carey Island project (if deemed feasible) as Westports 2 has relatively lower capex and a shorter development period,” it said.

In view of Visit Malaysia (VMY) 2020, the government’s target to attract 30 million tourist arrivals in 2020 can be reached successfully, the research house said.

“Tourists during the VMY 2020 campaign should support airports and airline revenue especially due to the weak ringgit (relative to the US dollar and some ASEAN peers),” it said.

Meanwhile, in view of a more modest oil-demand outlook, normalization of supply from Saudi Arabia and not-so-aggressive easing by the US Federal Reserve, Affin Hwang’s economics team has lowered its Brent crude and ringgit projections.

“We are raising AirAsia 2020-21 earnings forecasts by 2-3% and expect lower losses (2020E) from AirAsia X after incorporating a lower oil-price assumption of US$63/bbl (from US$68/bbl), partly offset by a weaker ringgit forecast of RM4.20/US dollar,” said the research firm.AirAsia X has upgraded by Affin Hwang to Hold (from Sell) on valuation grounds and recommended to Hold Westportsfor its strategically located assets, strong management team and good earnings growth trajectory.

“Avoid logistics companies (Sell on Tiong Nam Holdings Bhd and CJ Century Logistics Holdings Bhd) due to stiff competition and rising costs,” it said.

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