Global trade picks up, M’sia exports to strengthen in 2017

Posted on : 07-04-2017 | By : sabah today | In : National Business

KUCHING: Analysts believe that the global trade is finally picking up again as indicated by the strong recovery in exports across the Asian region for the last couple of months.

RHB Research Sdn Bhd (RHB Research) highlighted this in a recent report, and said it expected Malaysia’s exports growth to recover by a more robust pace of six per cent for 2017, as compared to 1.1 per cent in 2016.

It explained that some of the drivers to stronger exports numbers this year include a recovery in demand for commodity products, aided by higher prices, a pick-up in global semiconductor sales in late 2016, translating into higher electrical and electronics (E&E) exports, and an improving global trade outlook on the back of stronger global growth prospects.

The research team also expected the current account in the balance of payments to widen to RM33.7 billion or 2.6 per cent of gross domestic product (GDP) in 2017, from RM25.1 billion or two per cent of GDP in 2016, on account of higher trade surplus.

“Given the improvement in the outlook of the commodity sector and a recovery in global trade activity, we expect trade surplus to grow at a sustained pace heading into 2017.

“This would likely contribute to a larger surplus in the current account in the balance of payments,” it commented.

Meanwhile, RHB Research also pointed out that Malaysia’s exports growth in February was the strongest recorded in almost seven years.

“Exports gained pace to 26.5 per cent year-on-year (y-o-y) in February, its quickest pace since March 2010, from 13.6 per cent in January and compared with 10.7 per cent in December.

“The acceleration in February’s figure was for the fourth straight month; it was partly on account of a recovery in global demand and also due to a low base effect aside from some delayed shipments into February 2017 given a long holiday break in late January,” it explained, noting that a weaker currency also supported exports growth.

Stripping out the currency factor and measured in US dollar terms, the research team pointed out that exports accelerated to 19.1 per cent y-o-y during the month, its largest monthly increase in more than five years, from 10.8 per cent in January and compared to 6.2 per cent in December.

“We expect exports growth to normalise in subsequent months,” it opined.

On the performance of major group exports, RHB Research noted that the exports of E&E products (34.8 per cent of total exports) doubled its pace to grow by 22.4 per cent y-o-y in February, from +11.4 per cent in the previous month, and compared with nine per cent in December.

“In particular, the exports of electronic components and parts (largely semiconductor products) expanded for the fourth consecutive month and at a stronger double-digit rate in March, in line with a significant pick up in global semiconductor sales, its fastest increase in six years.

“This was aided by a quicker pace of growth in exports of audio visual equipment and machines as well as auto data processing equipment (largely computers) during the month,” it explained.

As for exports of commodity products (13.4 per cent of total exports), it noted that exports picked up to 32.6 per cent y-o-y in February, its fastest pace in more than five years, from 18.9 per cent in January and 8.5 per cent in December, on account of higher commodity prices and some expansion in volumes.

It said, “This was mainly reflected in an increase in shipments of palm oil, growing at its strongest pace since August 2011, on the back of higher prices and volumes. At the same time, shipments of crude oil picked up, retaining its strong growth rate from last month, as higher prices mitigated the decline in volumes.”

On the other hand, exports of liquefied natural gas (LNG) slowed, after recording its first expansion in 25 months.

Likewise, the exports of non-E&E products (51.8 per cent of total exports) rose to 27.9 per cent y-o-y in February, from 13.8 per cent in the previous month, and compared with 12.5 per cent in December.

As a whole, it pointed out that manufactured exports (80.4 per cent of total exports) picked up to a growth of 24.3 per cent y-o-y in February, its quickest pace in nearly seven years, from 12.2 per cent in January and compared with 10 per cent in December 2016.

“In terms of markets, the acceleration in February’s exports were helped by a broad-based stronger growth of shipments to China, the Asean region, EU and US, but partly offset by slower growth in exports to Japan,” it added.


Pos Malaysia’s maiden cross-border e-commerce collaboration a positive development

Posted on : 07-04-2017 | By : sabah today | In : National Business

KUCHING: Pos Malaysia Bhd’s (Pos Malaysia) maiden cross-border e-commerce collaboration with Tigers Global Logistics (M) Sdn Bhd (Tigers) has drawn positive views from analysts.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) was positive on this corporate development by Pos Malaysia as the e-commerce market accounts for approximately 30 to 33 per cent of the group’s total revenue which is gaining momentum.

According to Kenanga Research, as at the first nine months of 2017 (9M17), e-commerce accounted for an estimated 32 per cent of group revenue which is gaining importance due to the declining traditional mail segment.

“The collaboration will allow Pos Malaysia to ride on the fast-growing e-commerce services sector which presents an enormous opportunity for global logistics players to provide total integrated logistics services to e-retailers that require customised solutions for their complex supply chain.

“Pos Malaysia has the capability given that they already have first-mile and last-mile presence with KL Airport Services (KLAS) and Pos Malaysia,” the research arm said.

Kenanga Research kept its financial year 2017 estimate (FY17E) and FY18E earnings unchanged as the research arm has sufficiently factored in such earnings contribution into our earnings model.

The research arm was unable to quantify any earnings enhancement for now and only expected meaningful contribution over the medium to longer term.

“For illustrative purposes, assuming an additional RM200 million per annum revenue from this tie-up and a gross profit margin of 10 per cent which is an additional RM20 million gross profit accrue to Pos Malaysia,

“Tigers is a global logistics and transportation company that specialises in supply chain solutions, e-Fulfilment and transportation by air, sea and road,” it said.

Kenanga Research highlighted that under this collaboration, Pos Malaysia will have the mandate to manage the entire supply chain process, including customs clearance, product handlings, pick and pack as well as last mile delivery and in turn, Tigers will be responsible for the continuous investment in hardware, network and systems.

The research arm noted that following this collaboration, the first ever regional e-Fulfilment Hub is expected to be established nearby Low-Cost Carrier Terminal in Sepang.

“This hub is expected to benefit both international and local e-commerce players and customers across 30 countries in the Asia-Pacific region where it will be used to manage office of exchange, air conveyance and e-Fulfilment capabilities,” the research arm said.

Kenanga Research believed the share price of Pos Malaysia has already factored in this latest corporate development coupled with the recent news flow of the Digital Free Trade Zone and its valuations are running ahead of fundamentals.

Looking ahead, Kenanga Research expected Pos Malaysia to continue to be affected by weakness in conventional mail volume and the low margin trans-shipment business.

“Courier service demand is expected to improve and overcome the declining mail segment over the longer term due to the e-commerce boom.

“The synergy from KLAS is only expected to bear fruits over the longer run as capex and expansion costs could be a drag on earnings,” the research arm said.

It added that in an effort to enhance customer experience, Pos will introduce more 24/7 e-commerce convenient touch points by introducing Pos Laju EziBox (parcel locker service), Pos Laju EasyDrop (drop-off facility) as well as enhancement of facilities at all Pos Laju Centres and post offices nationwide.