PETALING JAYA: The First Selangor Plan (RS-1) development blueprint, which outlines major projects like the development of Port Carey, augurs well for the local ports and logistics sectors.
MIDF Research remarked in a thematic report today that the ports and logistics sector would experience “significant growth” thanks to some nine projects in the pipeline.
“The standout project is Carey Selangor, a proposed 6,000-hectare Special Economic Zone development in Pulau Carey,” it said.
The crown jewel, Port Carey is expected to boast an impressive 16km wharf length, with a handling capacity of 35.5 million twenty-foot equivalent units (TEUs) of containers.
On top of that, it can handle 23.9 million tonnes of dry bulk and 15.5 million tonnes of liquid bulk.
With the expansion of Westports also in the works, a third port may seem like unnecessary spare capacity to some.
However, MIDF viewed the development plan as strategic in the long run.
“The additional capacity in Port Klang is viewed as necessary to meet rising demand attributed to the expansion of industrial hubs in Selangor and neighbouring states,” it said.
Singapore has embarked on a plan to gradually consolidate its port operations at Tuas Port by 2040, which will almost double the country’s annual capacity to 65.0 million TEUs.
The first phase of the plan is expected to come on stream in 2027.
The research house remarked the expansion of port capacity in Selangor would prevent the ports from losing any more market share as global shipping alliances shift their operations to Singapore.
Additionally, Port Carey’s development is staggered over four stages and spans 35 years, though preliminary preparations are expected to be completed by 2025.
In Phase 1 of the development, the port’s focus will be on conventional cargoes to complement Westports and Northport rather than compete with it.
“The idea is for the additional container port capacity from Carey Island to be phased in gradually as the Westports 2 expansion reaches optimal capacity,” said MIDF.
“Westports has planned a significant expansion that includes the development of eight new container terminals, which will double its terminal handling capacity to 28.0 million TEUs by 2040,”
The award of the concession for the Westports 2 expansion is still pending approval from the relevant authorities, but MIDF expects it will make headway in the second half of this year.
MIDF had a “neutral” call on Westports with a target price (TP) of RM9.30 due to moderating global consumer demand.
It was slightly more optimistic with a “buy” call on Suria Capital Holdings Bhd, with a TP of RM1.30 thanks to stable palm and crude oil production.
MIDF also expected Swift Haulage Bhd (“buy”, TP: 90 sen) to benefit from higher container throughput due to a sizeable presence in Port Klang and large in-house assets.
More than just a third port
In addition to this development, other initiatives to support growth in the area include a mix of policies and projects.
MIDF noted that the designation of Pulau Indah as a free trade zone, the development of industry parks at Port Klang, Pulau Indah and Rantau Panjang will support shipping and logistics activities.
“The state government is also looking to promote the Port Klang Cruise Terminal, of which Westports has a 50% ownership interest following its acquisition in September 2021, as a prime destination for luxury cruise ships,” it noted.
Discussions with the transport ministry are ongoing, with the business plan expected to be completed by the third quarter of 2023.
The projects will have a positive spillover in the construction sector, of which MIDF maintains a positive outlook.
“(It) is expected to benefit both small and large-sized contractors, (as the RS-1 plan is) providing them with job flows over the foreseeable medium term,” it said.
From the research houses’ dialogue session with chief minister Amirudin Shari, it was learnt that Selangor’s major challenge is that it consists of 70% brownfield sites.
Brownfield sites refer to lands that have previously been built on. Greenfield sites are on the opposite end of the spectrum, referring to lands that have yet to be developed.
Nonetheless, the state continues to be a key driver of construction.
In 2022, the value of construction work done in Selangor was RM28.37 billion, or 23.3% of the work done nationwide, which was RM121.89 billion.
The research houses’ top picks in the sector are Gamuda (“buy”, TP: RM5.04), Sunway Construction (“buy”, TP: RM2.00) and IJM Corp (“buy”, TP: RM1.09).
Source: https://www.freemalaysiatoday.com/category/business/2023/04/17/first-selangor-plan-to-give-ports-and-logistics-a-competitive-boost/