Transportation & Logistics
Logistic Sector - 1QCY25 Earnings Review: Unremarkable performance                                    
Thu, 12-Jun-2025 07:46 am
by Jayden Tan • Apex Research

Review. The overall 1QCY25 sector performance was modest, broadly in-line with expectations for Westports and Swift Haulage, while Tasco fell short of estimates. The quarter coincided with seasonally weaker logistics activity, a trend typically observed at the start of the year due to slower restocking cycles among businesses and festive-related disruptions, contributing to softer sequential performance across the board. 

 

Westports demonstrated operational stability, reporting a 9% yoy increase in CNP to RM222.5mn, supported by higher storage revenue and lower operating costs (fuel and depreciation). However, CNP declined 13% qoq due to softer gateway volumes amid stricter customs inspections and seasonal effects from Ramadan and leap year base effect. The Westport 2 expansion remains ahead of schedule, reinforcing the port's strategic capacity growth and long-term prospects. Westports is also poised to benefit from a potential port tariff revision, which could provide a meaningful revenue uplift if approved by year-end.

 

In contrast, 3PL operators faced considerable headwinds. Tasco's 71% yoy decline in CNP was primarily due to the loss of its major solar client, Jinko Solar (-RM140mn revenue impact for FY25), combined with heightened administrative and tax expenses. While the onboarding of RM80mn in new contracts and strategic investments in warehouse expansion partially mitigated the negative impact, these initiatives have yet to yield immediate profitability benefits amid ongoing margin challenges.

 

Swift Haulage recorded a modest performance with CNP falling 12.4% yoy to RM7.2mn, mainly due to higher finance costs and margin compression in its haulage and land transport segments. On a qoq basis, CNP improved 17.9%, driven by stronger contributions from freight forwarding.

 

The broader local 3PL industry is increasingly challenged by Chinese logistics companies. Many Chinese manufacturers and investors in Malaysia prefer engaging Chinese-owned logistics service providers, leading to intensified competition and reduced business volumes for local logistics operators. This dynamic continues to compress margins and limit growth opportunities for domestic players.

 

Outlook. The sector outlook remains cautious amid persistent geopolitical uncertainties and intense competitive pressures. Westports maintains a conservative volume growth forecast, strategically shifting its focus toward higher-margin gateway cargo to optimize earnings amid the ongoing Westport 2 development. Local 3PL firms are expected to face ongoing margin compression due to competition from Chinese logistics providers, who enjoy preferential business from China-based investors and manufacturers. 

 

Valuation & Recommendation. We are NEUTRAL on the logistic sector for now, given the challenging competitive landscape and margin pressures facing local operators. That said, we believe most of these headwinds have been largely priced in. Westports (BUY, TP: RM5.08) remains our preferred pick due to operational resilience, expansion potential, and tariff hike catalyst. We maintain HOLD ratings on Swift Haulage (HOLD, TP: RM0.39) and Tasco (HOLD, TP: RM0.51), reflecting ongoing competitive headwinds, margin uncertainties, and slower-than-anticipated earnings recovery trajectories.

Recommendation: Neutral
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