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Do Not Buy Logistics Stocks Until You Know About THIS!!

Oraclept
Publish date: Fri, 07 Jun 2024, 07:32 AM
Oraclept
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Do Not Buy Logistics Stocks Until You Know About THIS!!
Logistics is the backbone of commerce in Malaysia, encompassing a vast network that ensures the seamless movement of goods across the country and internationally. The logistics value chain in Malaysia comprises various segments, each playing a crucial role. Transport service providers are at the core, offering multiple modes of transport such as road, rail, air, and sea. Road transport operators use motor vehicles like trucks and trailers, while rail transport involves trains moving goods across the nation’s railway tracks.
Ocean transport is managed by operators using ships for international trade, and air transport is handled by planes for swift delivery of high-value or time-sensitive goods. Multimodal transport operators leverage multiple transport modes to optimise logistics efficiency, and terminal operators manage key transportation hubs like airports and seaports.
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Beyond transportation, warehousing and distribution centres are essential components of the logistics chain, ensuring that goods are stored and managed efficiently before reaching their final destinations. Freight forwarders and third-party logistics (3PL) providers coordinate the logistics process, offering expertise in transportation, warehousing, and distribution. Customs brokers navigate regulatory compliance to facilitate smooth import and export processes.
Value-added services such as packaging, labelling, and reverse logistics enhance supply chain efficiency, while technology and digital solutions like Transportation Management Systems (TMS) and Warehouse Management Systems (WMS) drive modern logistics operations.

Recently, the logistics industry has seen a significant increase in freight rates, especially impacting sea freight routes. For instance, the freight rate for the Asia-Europe route has seen a substantial hike. The cost for a twenty-foot equivalent unit (TEU) has surged from approximately $1,500 to $3,000, marking a 100% increase. This spike in freight rates is attributed to various factors, including increased demand, port congestion, and container shortages. Such an increase affects the overall cost of shipping goods, which can have a cascading effect on the prices of goods and services.
It is important to note that this price spike is primarily affecting sea freight. Other segments of the logistics value chain, such as road, rail, and air transport, have not experienced similar increases in costs. Investors should, therefore, focus their attention on sea freight pure players when considering the impact of these price changes. Companies that are heavily involved in sea freight are more likely to be directly impacted by the recent freight rate hikes, and understanding this can help make informed investment decisions.
Among the logistics players in Malaysia that are listed in the ACE Market of Bursa Malaysia, CJ Century, AGX, SinKung, and KGW each have distinct business models. CJ Century focuses on integrated logistics services, including contract logistics and oil and gas logistics, catering to a diverse range of industries. AGX, on the other hand, specialises in providing customised logistics solutions with a strong emphasis on customer service and flexibility. SinKung operates primarily in the warehousing and distribution sector, offering comprehensive storage and distribution solutions.
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In contrast, KGW stands out as a leading pure sea freight player with a focused business model that leverages the current market dynamics, with Malaysia to the United States route. KGW’s extensive network and expertise in sea freight make it a strong candidate for benefiting from the recent freight rate hikes. The company’s strategic positioning and efficient operations enable it to capitalise on the increased demand for sea freight services, potentially leading to higher profitability and growth. Currently, KGW has the lowest market capitalization so far compared to other logistics peers.

KGW (0282)
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