Logistics: Red Sea Stabilised But New Risks Emerge In Straits Of Hormuz
MIDF Amanah Investment Bank Bhd (MIDF Research) has maintained a NEUTRAL rating on the ports and logistics sector, with Buy on Tasco and a target price of RM0.68, citing its favourable valuation and protective pricing mechanisms amid freight volatility.
Container throughput in Malaysia rose 6% year-on-year in the first quarter of 2025, reaching 7.7 million TEUs, boosted by frontloading activities ahead of rising US tariffs. The Port of Tanjung Pelepas saw the strongest growth at 11%, driven by its participation in the Maersk-Hapag Gemini alliance. Meanwhile, Port Klang recorded a 2% gain, while Penang and Johor reported contractions. Spot freight rates from Southeast Asia to the US West Coast surged between late March and April, supporting the spike in volumes.
Drewry revised its global container volume growth forecast for 2025 to 1.9%, reversing earlier expectations of a decline, which the house said suggests further near-term upside for transhipment ports. However, the second half of the year remains uncertain amid tariff uncertainties, vessel oversupply, and tepid European demand.
MIDF Research noted that the Red Sea shipping routes have largely stabilised, but new risks have emerged from geopolitical tensions in the Strait of Hormuz, following an Iranian parliamentary vote to shut the channel. Although Malaysia's Westports is unlikely to be directly affected due to its route bypassing Hormuz, regional ports may face vessel bunching and increased yard utilisation if shipping lines are forced to reroute. The investment bank flagged that short-term berth delays could still occur in the region as feeder alignments adjust.
Warehousing demand remains strong, especially in the Klang Valley, where prime logistics space is being absorbed steadily thanks to e-commerce and ongoing manufacturing investment. Rents in Johor are gradually increasing due to cross-border spillover effects from Singapore and data-centre driven activity, while Penang's rates have levelled off with new capacity easing pressure. Vacancy rates across the country remain below 5%, with most new facilities already pre-leased. MIDF expects the Smart Logistics Complex incentives under Budget 2025 to further support the sector's medium-term rental stability.
Stricter truckload limits will be enforced from July 1, with overloaded vehicles denied port access. This includes a nationwide ban on tandem container configurations by January 2026. MIDF cautioned that while safety will improve, haulage costs are likely to rise, and inland delivery times may face some initial disruption as logistics firms adapt their fleet operations.
Tasco remains the sector's top pick for MIDF Research, as the company trades below its historical average and has implemented a clause to adjust prices if rates swing more than 10% above tender levels. With 80% of its forwarding business conducted through tenders, Tasco also benefits from customers favouring short-term contracts during volatility, which typically offer better margins. Earnings are expected to improve from contract logistics wins and Investment Tax Allowance support. Related
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