Digital Free Trade Zone seen as boon for MAHB, Pos Malaysia

PETALING JAYA: Analysts foresee transport and logistics companies Malaysia Airports Holdings (MAHB) and Pos Malaysia Bhd to be major beneficiaries of the implementation of the Digital Free Trade Zone (DFTZ).

In a note yesterday, AmInvestment Bank said it expects the setting up of the hub to be positive on the long-term growth of MAHB, as it will be located in KL Aeropolis, with the initial physical zone at the 8ha site in Aeropolis, which was previously the Low-Cost Carrier Terminal.

It was reported that Alibaba Group would also be looking at possible extension into the 37ha adjoined the site.

In a separate note, HLIB Research said the memorandum of understanding (MoU) is positive to MAHB, on accelerating the development of KLIA Aeropolis – Air Cargo and Logistics, which is being recognised as DFTZ.

“We believe the initiative will attract strong demands from logistics players (domestic and international) for shares of land development earmarked under KLIA Aeropolis – Air Cargo and Logistics,” it said.

On Wednesday, Prime Minister Datuk Seri Najib Abdul Razak launched the DFTZ, an e-hub jointly established by Alibaba Group and Malaysia Digital Economy Corp (MDEC), which aims to lower trade barriers and expand the market for SMEs.

During the launch, MAHB and the logistics arm of Alibaba, Cainiao Network, signed an MoU for the development of a regional electronic commerce and logistics hub in KLIA Aeropolis by end 2019, with operations to be led by Cainiao and Lazada.

In addition, AmInvestment said it also expects Pos Malaysia to benefit in the long run from the DFTZ due to its integrated logistics chain.

“Its subsidiary KL Airport Services Sdn Bhd (KLAS), currently providing warehousing and logistics services in KLIA (KL International Airport), could be among the major beneficiaries of DFTZ,” it added.

It was reported that the initial phase of the project will be launched before end 2017 whereby Alibaba, Cainiao, Lazada and Pos Malaysia will be utilising KLAS upcoming new warehouse in KLIA.

HLIB Research said it upgraded Pos Malaysia to “hold”, with a higher target price of RM4.80, from RM3.36 previously post its earnings upgrade and roll forward valuation pegging to higher target FY19 price/earnings ratio multiple of 25 times to price in improvement in prospects for e-commerce business in Malaysia post-DFTZ launch.

Meanwhile, AmInvestment said it believes that the DFTZ will also boost the long-term outlook of Malaysia’s logistics companies due to the anticipated increase in the volume of goods moving through the zone.

The DFTZ has the potential to double the growth rate of Malaysian SME’s goods export by 2025, supporting an estimated US$65 billion (RM288 billion) worth of goods moving through the zone.

Nevertheless, AmInvestment said it maintained its “neutral” call on the transport and logistics sector.

“Although we believe the set-up of DFTZ will be positive on the long-term growth of MAHB and the overall logistics sector in the country, we believe it is still too early to quantify the impact of DTFZ, as it is only expected to be launched by end-2019,” it said.