• Top Pick: TASCO. For this year, within the transportation sector, Malaysia Airports' (MAHB) privatisation is imminent, while alleviated congestion means that it is business as usual for the seaports. Despite the continued optimistic outlook on domestic trade, geopolitical risks persist - as such, we are leaning towards the logistic players (TASCO being our Top Pick), amidst elevated freight rates as a result of route disruptions across the globe. We remain NEUTRAL on the sector.
• Cautiously optimistic on 2025 trade outlook. Despite maintaining a positive outlook on Malaysia's exports in 2025, the RHB Economics team remains cautious on short-term volatility, specifically on potential protectionist policies implemented by the US under the Donald Trump-led administration ahead. While any direct impact on Malaysia's export sector from US protectionism may be minimal, significant indirect effects could arise through China - as Malaysia is a key supplier within China-centric supply chains.
• Lingering geopolitical risks affect the freight segment. The Red Sea crisis remains, with shippers continue avoiding the affected zone. Although shippers have adjusted to using the longer route, freight rates are still higher YoY. Fitch Ratings expects container transport volumes to rise by 3% in 2025, which will be more than offset by supply growth of 5% leading to declining rates. However, we think ocean freight rates are likely to stay above pre-pandemic levels in the near term, mainly due to potential frontloading in anticipation of US tariffs, Lunar New Year-related demand, political unrest in the Middle East and Ukraine, as well as a potential strike at the US East and Gulf Coast ports. These disruptions could also result in an ocean-to-air shift, affecting the air freight market.
• Outlook. While full recovery of air passenger movements in 2024 is unlikely, 11M24 passenger numbers have improved to 93% of pre-pandemic levels, from 78% in 2023. Hence, we anticipate 2025 air passenger numbers for Malaysia to rise by 20% to 113.0m, exceeding pre-pandemic levels of 105.3m passengers. Regardless, the MAHB privatisation process is still advancing, with a delisting expected in 1Q. Despite the independent advice circular deeming the offer unfair, it provides shareholders an exit at the highest price MAHB has ever traded. With an 84% acceptance rate as of 8 Jan, the 90% threshold for delisting seems achievable. Regionally, seaport congestion has eased as shippers adapt to longer routes amid attacks from Houthi rebels, while the Panama Canal is seeing a trade rebound. Westports' yard occupancy has normalised to 70% (from 91% in 2Q24), supporting container handling revenue growth at the expense of lower value-added services (VAS) contributions from reduced storage revenue. In logistics, DHL expects ocean freight rates to rise, from strike risks at US ports, potential tariffs, and ongoing Red Sea diversions. Air cargo demand is growing, as shippers shift from ocean freight, adding capacity pressure and lifting rates.
• Still NEUTRAL on sector as sector heavyweights under our coverage are fairly valued. In logistics, we are more optimistic on TASCO (our Top Pick) due to its prospects for the year ahead on the back of an improved freight forwarding segment, volume recovery, contribution from new warehouses, and available tax credits from the integrated logistics services (ILS) incentive.
• Downside risks: A continued slowdown in global economic growth, which will paralyse trade flows, and a further weakening in freight rates.

Source: RHB Research - 14 Jan 2025