• The 3QCY24 earnings performance was mixed, with Perak Transit meeting expectations, Westports outperforming, and Swift Haulage underperforming.

• In 3QCY24, Perak Transit and Westports delivered higher profit growth driven by higher rental income and cost efficiencies, respectively. Meanwhile, Swift Haulage underperformed due to rising costs and margin pressures.

• We maintain a cautious outlook on the port and logistics sector despite improving domestic conditions, while we remain positive on Perak Transit prospects.

• Maintain a NEUTRAL call on the Transportation sector, with a BUY call on PTRANS (TP: RM0.93) and HOLD calls for Westports (TP: RM4.65) and Swift (TP: RM0.50).

Varied Result in 3QCY24

The recent 3QCY24 results showed a mixed performance against our forecast (Perak Transit: Inline, Westports: Above, Swift Haulage: Below). Among our coverage, Westport was a standout performer, with its 3QCY24 core net profit jumped by +11.6% QoQ and +16.6% YoY, primarily supported by lower depreciation expenses from the extension of concession asset lifespans and reduced operating costs, particularly fuel and electricity. Perak Transit core net profit increase by +0.2% QoQ and 6.7% YoY, driven by higher rental income from new tenants at its terminals. However, our earnings forecast was slightly revised down by 3-4% due to expectations of higher effective tax rate. In contrast, Swift Haulage recorded a disappointing performance, with core PATAMI declining by -30.7% QoQ and -10.7% YoY, mainly due to rising costs, lower margins in land transportation, and higher finance charges. Overall, the port sector shows positive outcomes in cost control and infrastructure expansion, while land transportation faces margin pressures.

Cautious but Constructive Outlook

We maintain a cautious yet constructive outlook on the port and logistics sector despite improving domestic economic conditions. Our internal projections export and import growth by 6.2% and 5.8%, respectively, in 2024. Within the port industry, Westports, a company under our coverage, is expected to exhibit a flattish outlook due to ongoing market challenges, including shifts in transshipment volumes and subdued demand, which potentially constrain overall volume growth. Looking ahead, the sector's performance will depend on sustained gateway growth and the recovery of transshipment activities, with Intra-Asia trade continued as a key growth driver.

Meanwhile, Swift is anticipated to deliver better QoQ results, supported by the 4Q seasonal peak. Looking ahead, the expanding e-commerce market is expected to bolster demand for distribution hubs and warehouses, benefiting Swift's Warehousing and Depot segment. However, challenges persist in the land transportation and freight forwarding segments due to intensified industry competition, which could pressure volumes and rates. Additionally, higher operating costs are likely to exert pressure on margins in the near term.

For Perak Transit, we maintain a positive outlook, driven by i) the commencement of SVETOFOR (grocery) as a new tenant in Dec 2024, ii) the start of Tronoh Sentral construction in 2HFY2024 with completion by end-2026, and iii) development of a new bus terminal in Kota Bharu, supporting long-term growth.

Neutral on the Sector

Maintain a NEUTRAL recommendation on the sector, with a BUY call on Perak Transit (TP: RM0.93), while HOLD call for Westports (TP: RM4.65) and Swift (TP: RM0.50).

Source: BIMB Securities Research - 6 Dec 2024