17 March, 2008

THE commercial transportation industry remains strong amid political uncertainty due to opposition parties taking control of Penang, Selangor, Kedah, Perak and Kelantan.

OSK Research Sdn Bhd analyst Chris Eng said that despite the five states falling into the Opposition, there would be no impact on the maritime industry since it mainly banked on international businesses.

"When we look at the shipping sector in Malaysia, we note two important facts that will moderate the sector from any impact from the change in state governments.

"First, major ports remain under the jurisdiction of the Federal Government and large shipping companies are international companies with activities on a global scale," he told StarBiz.

Eng said while the major ports of Port Klang and Penang Port were in states won by the Opposition, the running of a major port would still fall under the federal authority.

"Although there may be a possibility of a slowdown in port expansion, we do not expect any major delay due to the status of Malaysia as a trading nation," he said.

He noted that Bintulu Port and Kuantan Port, which are still in Barisan Nasional-run states, might see a faster pace of developments than previously due to the Sarawak Corridor of Renewable Energy and the East Coast Economic Region respectively.

"Development of Port of Tanjung Pelepas, which is 70% owned by MMC Corp Bhd, may also be given priority as it is the gateway to the Iskandar Development Region," he said, adding that OSK maintained a buy call on MMC with a target price of RM5.60.

On multinational shipping companies such as MISC Bhd and Malaysian Bulk Carriers Bhd (Maybulk), Eng said these companies operated business activities on a global scale.

"For example, MISC's Aframax fleet is still significantly based in the US Gulf of Mexico doing lightering business while its very large crude carrier fleet is distributed globally. (Lightering is the process of transferring cargo mainly between vessels of different sizes.)

"Its liquefied natural gas (LNG) division will still ferry the substance from the LNG complex in Bintulu, primarily for East Asian buyers," he said.

As for Maybulk, he said, the drybulk and refined products shipper had deployed its ships globally and had no particular ties to Malaysia except perhaps for its current contract to ship coal for Tenaga Nasional, which would expire this year.

The research house maintained its neutral call for MISC with a target price of RM9.80 and a buy call for Maybulk with a target price of RM5.68.

On the other hand, Eng said, the situation could be slightly negative for the aviation industry.

"Given the need for the Federal Government to reassess the current situation and conduct a detailed post-mortem of the election, we may see its focus diverted from Malaysia Airports Holdings Bhd's (MAHB) financial restructuring which may languish again for some months.

"Although we are still hopeful for resolution in June and make no changes to our estimates for now, we would not be surprised if the resolution gets pushed to 2009.

"Still, MAHB is attractive enough even without the resolution and we maintain our buy call on MAHB with a target price of RM3.72," he said.

On the same note, he said, Penang airport expansion plan also remained a question mark.

"Prior to the election, there had been some talk of further expanding Penang Airport to cater for the projected larger traffic under the Northern Corridor Economic Region.

"There has also been talk of a possible low-cost carrier terminal (LCCT) in Penang. We are now uncertain of the status of these proposals," he said.

"Although we have not considered a new Penang LCCT in our forecasts for MAHB, AirAsia Bhd or Malaysian Airline System Bhd (MAS), we feel it would be prudent to expect at least some form of delay in this plan.

"AirAsia would, therefore, not see a major jump in its traffic via Penang while the growth of Firefly, based out of Penang, would also not see any rapid growth so soon."

Nonetheless, OSK Research maintains its earlier forecasts for AirAsia and MAS – neutral call, with a target price of RM1.66, for AirAsia and a buy call with a target price of RM6.40 for the latter.

This article is a verbatim copy of the original article from The Star.