The Malaysian Economy
According to Bank Negara Malaysia’s (BNM) 2017 Annual Report, the Malaysian economy registered a robust growth of 5.9% in 2017, compared to 4.2% in 2016. Domestic demand continued to anchor growth during the year, underpinned by faster expansion in both private and public sector spending. On the external front, real exports registered the strongest growth since 2010, on the back of stronger global expansion.
Domestic demand continued to anchor growth in 2017, underpinned by strong fundamentals, better labour market conditions and improving sentiments. The materialisation of positive spill-overs from the external sector further reinforced domestic demand.
• Private consumption growth improved to 7.0% in 2017 (against 6.0% in 2016), supported mainly by continued wage and employment growth. Aggregate nominal wages in the private and public sectors grew by 6.4% and 6.2%, respectively in 2017 (2016: 4.3% and 6.4%, respectively). The recovery in consumer sentiments from its lowest level in 2015 also contributed to the stronger private consumption growth in 2017.
• Public consumption growth expanded by 5.4% (2016: 0.9%) due to higher spending on supplies and services by the government amid sustained growth in emoluments. The increased expenditure on supplies and services was mainly attributable to spending on maintenance and minor repair works.
• Gross fixed capital formation grew at a faster pace of 6.2% in 2017 (2016: 2.7%), driven by improvements in both public and private investments.
• Public investment registered a marginal growth of 0.1% in 2017 (2016: -0.5%). This was supported by continued spending by both the government and public corporations, mainly in the downstream oil and gas as well as transport and utilities sub-sectors. The continued capital outlays were also to accelerate urban and rural development.
• Private investment growth accelerated to 9.3% (2016: 4.3%), as firms benefited from the conducive external and domestic operating environment. The strong growth in exports led to positive spill-overs to the domestic economy, as firms embarked upon capacity expansion to cater to higher orders. Financing conditions, profitability and business sentiments also improved during the year. On a sectoral basis, private investment growth continued to be underpinned by the implementation of new and ongoing projects in the manufacturing and services sectors.
On the supply side, most sectors registered higher growth in 2017. Malaysia’s growth performance remained principally driven by the services and manufacturing sectors, which benefited from marked improvements in domestic and external conditions.
• Growth in the services sector expanded at a faster pace of 6.2% (2016: 5.6%) amid broad-based improvements across most sub-sectors. On the consumer front, better labour market conditions and improving consumer sentiments lifted growth in the retail, food and beverages and accommodation and motor vehicles sub-sectors. The finance and insurance sub-sector registered higher growth, benefiting from the strong pick-up in capital market activity. In the transport and storage sub-sector, growth was supported by stronger trade and air passenger traffic growth. Growth in the information and communication sub-sector was also higher, reflecting higher demand for data communication and computer services.
• The manufacturing sector expanded 6.0% in 2017 (2016: 4.4%), driven by higher growth in the domestic-oriented industries and continued expansion in the export-oriented industries. In the domestic-oriented industries, production of both commercial and consumer transport equipment turned around, reversing a decline in the output of motor vehicles in the previous year. Growth in the domestic-oriented industries was further supported by stable demand for food-related products and construction-related materials. Growth in the export-oriented industries was in tandem with the broad-based recovery in global demand, which supported the increased production of electronics and electrical products as well as resource-based products such as palm oil-related and petroleum-related products.
• The construction sector registered a moderate growth of 6.7% (2016: 7.4%). Growth was supported mainly by the civil engineering sub-sector, due to steady progress of large petrochemical, transportation and utility projects. The special trade sub-sector benefited from increased activity from projects in the early stages of construction, such as land clearing, piling and land reclamation work. Growth in the residential sub-sector moderated, consistent with the record-high number of unsold residential properties. In the non-residential sub-sector, growth was sustained by higher activity from mixed developments, industrial and social projects such as theme parks and sports complexes, which was offset by the ongoing weakness in the commercial segment due to an oversupply of office space and shopping complexes.
• Agriculture production growth rebounded to 7.2% (2016: -5.1%), driven mainly by a turnaround in crude palm oil (CPO) production, as yields recovered from the negative impact of El Niño in 2016.
• In the mining sector, growth moderated to 1.1% (2016: 2.2%), reflecting the voluntary crude oil supply adjustments by Petronas, in line with the Organization of the Petroleum Exporting Countries (OPEC) agreement to restrain oil production until end-2018. Growth remained supported by higher production in the natural gas sub-sector, reflecting the increased capacity of natural gas facilities.
Outlook for 2018
Amid stronger global economic conditions, the Malaysian economy is projected to grow by 5.5% to 6.0% in 2018. Domestic demand will continue to be the anchor of growth, underpinned by private sector activity. Private consumption growth is expected to remain sustained, supported by continued growth in employment and income, lower inflation and improving sentiments. Private investment growth will also be sustained, underpinned by ongoing and new capital spending in both the manufacturing and services sectors; and strengthened by continued positive business sentiments. Public sector expenditure is projected to decline due to the contraction in public investment amid more moderate growth in public consumption. Apart from domestic demand, gross domestic product (GDP) growth will also be supported by the favourable external demand conditions. Both gross exports and imports are forecasted to grow at above-average trends in 2018.
The Malaysian government remains committed to continuously support the growth of the logistics sector and in opening more doors to engage local and international players to serve the industry. Transport minister Datuk Seri Liow Tiong Lai said the commitment was proven through several initiatives implemented in the past years - both on papers and infrastructure developments - especially in riding on the global shift towards digital. Despite being on track to reinvigorate the logistics industry, the government is also equally aware of the need to ensure the sustainability of the sector.
The Digital Free Trade Zone (DFTZ), launched last year by Dato’ Sri Mohd Najib Tun Abdul Razak together with Jack Ma (founder and executive chairman of Alibaba Group), will create much-needed disruptive innovation for the logistics ecosystem. It will provide physical and virtual zones to facilitate small and medium-sized enterprises (SMEs) to capitalise on the convergence of exponential growth of the internet economy and cross-border e-commerce activities, acting as a microcosm to support internet companies to trade goods, provide services, innovate and co-create solutions. DFTZ will be a boost to Malaysia’s e-commerce roadmap that was introduced in 2016, which aims to double the nation’s e-commerce growth and increase the GDP contribution to RM211 billion by 2020.
DFTZ consists of three main components that combine both physical and virtual zones, which will be implemented in phases. The physical zone comprises of the e-Fulfillment Hub and Satellite Services Hub while the virtual zone consists of the e-Services Platform.
• The first e-Fulfillment Hub will be centred at Kuala Lumpur International Airport (KLIA) Aeropolis. KLIA Aeropolis development is centred on the key clusters of air cargo and logistics, aerospace and aviation. The initial phase was rolled out by Alibaba, Cainiao, Lazada and POS Malaysia, leading to the formal launch of Alibaba's facility at the end of 2019.
• The other physical component is the Satellite Services Hub, to be located in Bandar Malaysia. Kuala Lumpur Internet City (KLIC) will be the first satellite services hub of DFTZ and will be developed by another strategic partner, Catcha Group, Southeast Asia’s leading internet group. KLIC is set to be the premier digital hub for global and local internet-related companies targeting Southeast Asia. It will comprise of key players within the internet ecosystem to facilitate end-to-end support, networking and knowledge-sharing that will drive innovation in the internet economy and the e-commerce industry.
• The virtual zone, which is the e-Services Platform, will be made available in time to support the goods movement within DFTZ. The e-Services platform will also offer integrated services that will help deliver a streamlined and efficient experience to the users operating from the DFTZ.
While Malaysian Airports Holdings Bhd (MAHB) is expected to be the main beneficiary of the project (as the landowner and developer of KLIA Aeropolis), analysts believed local logistics players with total supply chain management and last-mile delivery competencies are poised to garner a slice of action in the physical zone of the DFTZ. As at early April 2018, SMEs participating in the DFTZ have generated a total sales of RM52.1 million and the number of SMEs in the DFTZ SME Onboarding Program has increased from 1,972 to 2,651, with a target to reach 10,000 by end of 2018.
The DFTZ is expected to receive RM800 million investment to further boost the development of the country's digital economy zone on 36.4 hectares of land, which will be fully completed by 2020. MAHB and Alibaba Group through its logistics unit, Cainiao Network will develop KLIA Aeropolis DFTZ Park, which sits on a 24.9-hectare land within the DFTZ development area. The project is being developed and will be handed over to a JV company for facility development, which will be the first Electronic World Trade Platform (eWTP) outside China. The facility will include 1.2 million square feet of gross floor area (GFA) for cargo terminals, construction centres, warehouses and operating offices. It is expected to be completed in the third quarter of 2020. Another 12.1 hectares development will be built for other e-commerce players to expand their business through DFTZ. MAHB will also develop one million square feet of GFA for cargo convenience in the next three years. To this end, it is looking for potential partners to develop high-grade warehouses and distribution centres through built and lease concepts to meet other requirements including halal logistics.
Moving on to logistics news, while many conventional logistics players have ventured into delivery or courier services to grab a share of the e-commerce pie, Tasco Bhd had chosen the road less travelled to develop a new income stream – entering the cold chain business. Last year, Tasco acquired one of the largest cold chain logistics player in the country, Gold Cold Transport (GCT) Sdn Bhd for RM186 million. It also took over the business of MILS Cold Chain Logistics from Swift Integrated Logistics Sdn Bhd for RM9.93 million in the same year. The acquisition of GCT and MILS puts the company on the right track in becoming an end-to-end logistics solutions provider, covering both dry and chill logistics delivery. Tasco is expected to become one of Malaysia’s leading cold chain services providers in terms of cold storage capacity, second only to Tiong Nam Logistics Holdings Bhd.
GCT, which has an operational track record of more than 20 years, operates a sizeable fleet of 192 reefer trucks and operates cold room warehouses in Shah Alam with a storage capacity of 27,128 pallets. Its customers are mostly large multinational corporations in the food industry. On the other hand, MILS owns three reefer containers and operates in a warehouse building. The acquisition of MILS enables Tasco to have access to the former’s existing business operations and its cold room storage facility with a capacity of 10,643 pallet space in Westport. With the acquisitions, Tasco has efficiently scaled up its cold chain logistics capabilities, with a total cold room storage capacity of 37,771 pallet space.
Meanwhile, Tiong Nam Logistics Holdings Bhd saw its net profit dropped 43% to RM9.83 million for the third quarter ended Dec 31, 2017 (3QFY18) from RM17.26 million a year ago due to higher effective tax rate. The effective tax rate increased by 25.2% to RM5.37 million in the financial quarter under review against RM4.29 million in the previous corresponding period due to certain expenses which were non-deductible. Quarterly revenue, however, expanded 24% to RM172.78 million from RM139.28 million due to increase in logistics and warehousing as well as property development revenue. Revenue from logistics and warehousing services increased by 13.4% to RM 131.63 million compared to RM116.08 million a year earlier due to securing of new total logistics customers as well as business expansion from existing customers.
For the cumulative nine months period, Tiong Nam’s net profit dipped 46.15% to RM23.56 million from RM43.75 million, while revenue grew 18.33% to RM487.13 million versus RM411.69 million. Going forward, Tiong Nam said it will continue seeking new business opportunities, focus on operational efficiency and cost control effectiveness to better contend with competition.
Freight Management Holdings Bhd's earnings rose 16.1% to RM5.87 million in the second quarter ended Dec 31, 2017 (2QFY17) from RM5.05 million a year ago as a result of gain on dilution on investment in TCH Marine Pte Ltd. The logistics company reported that revenue rose 14.4% to RM132.03 million from RM115.39 million mainly due to increase of activities. The group’s profit before tax for the quarter increased by 15% to RM7.9 million.
Freight Management saw all service units reported growth other than the tug and barge service unit, which reported two months compared with three months a year ago. Seafreight contributed the highest revenue contribution at RM83.9 million – up 14% year-on-year (y-o-y). Its 3PL and warehousing recorded growth of 35% to RM15.4 million and the landfreight services was up 21% to RM5.1 million. In the first half ended Dec 31, 2017, earnings rose 14.5% to RM11.83 million from RM10.32 million in FY16. Its revenue increased by 17.9% to RM259.75 million from RM220.17 million.
Logistics players are hoping that 2018 will bring a reversal of fortunes, supported by stable economic growth as their prospects are much related to the performance of the economy. For most, 2017 was challenging mainly due to increase in operating costs amid intense competition in the industry. Expected improvements in exports would have a positive impact on the industry, with BNM forecasting 2018 gross exports to grow 8.4% from a year earlier, supported by favourable demand from major trading partners, continued expansion in the global technology upcycle and broadly sustained commodity prices.
In April 2017, a reshuffle of the world’s key shipping alliances saw the formation of the Ocean, THE and 2M shipping alliances. These new alliances represent 77.2% of global container capacity and 96% of all East-West trades’ container capacity. Prior to the realignment, four shipping alliances namely G6, CKYHE, 2M and Ocean alliances, served the global ports industry. The recent round of container shipping line consolidation and alliance reshuffling leaves Malaysian ports out of the race for transhipment volumes, as bigger groups opt to maintain or move their services to Singapore rather than to Port Klang or Port of Tanjung Pelepas.
Westports Holdings Bhd's net profit rose 36.1% to RM210.98 million in the fourth quarter ended Dec 31, 2017 (4QFY17) from RM155 million a year ago, on lower tax expense mainly due to tax incentives. However, quarterly revenue remained flat at RM573.96 million from RM573.26 million in 4QFY16. In a filing with Bursa Malaysia, Westports said operational revenue for the quarter was down by 7% y-o-y at RM435.1 million, mainly due to lower container throughput, which fell 13% y-o-y to 2.22 million twenty-foot equivalent units (TEUs). While local container throughput recorded a growth of 15% (in 4QFY17), the transhipment segment saw a 23% decline.
For FY17, Westports' net profit rose 5.6% to RM651.51 million from RM616.83 million in the previous financial year, while revenue was up 2.6% to RM2.09 billion from RM2.04 billion. However, the group's operational revenue declined 5% y-o-y to RM1.71 billion in FY17, mainly due to a reduction in container throughput by 9% to 9.02 million TEUs. Local container throughput recorded a growth of 10%, while transhipment segment declined by 16% in FY17. The lower performance on transhipment segment is due to changes in container shipping industry, arising from the formation of new global alliance and reconstituted service offerings and port of calls, as well as mergers and acquisitions.
On prospects, Westports said its container throughput is expected to register modest growth rate of low single-digit percentage in FY18. Moving forward, the group would employ three key strategies to improve competitiveness and to attract more port calls from the shipping liners – cost efficiency, minimal berthing delays and high levels of productivity.
Westports, which can handle up to 13 million TEUs per annum, has been undergoing expansion to further increase its container handling capacity and to cater for its long-term growth. It is currently at the tail-end of its CT1 to CT9 container terminals expansion, which will boost the group’s container handling capacity to 16 million TEUs upon completion. By 2040, Westports aims to more than double its current capacity to 30 million TEUs, with the development of CT10 to CT19 container terminals. It is estimated that the group could invest up to RM10 billion for the expansion, via a combination of borrowings and internally-generated funds. The increase in capacity by 2040 will ensure that the group keeps up with the planned consolidation and expansion of Singapore’s ports in Tuas as well as maintaining its lead against other planned terminals in Indonesia.
MMC Corp Bhd’s 70%-owned subsidiary, Pelabuhan Tanjung Pelepas Sdn Bhd (PTP), has installed the region’s tallest ship-to-shore quay cranes at its port in Johor. The four super post panama cranes are part of eight cranes ordered by the container terminal, with the remaining cranes expected to be delivered by December this year. Each crane unit measures at a lifting height of 55.5m and weighs at 1,900 tonnes. The new quay cranes will complement the 50 existing cranes in operation at PTP. PTP also acquired other terminal equipment such as 93 units of prime movers and 29 units of rubber-tyred gantry cranes. The port is undertaking a series of equipment refurbishment and acquisition projects worth RM500 million to create a new, full capacity berth to cater to mega vessels. At present, PTP operates 14 berths measuring 5km of quay length.
In a related development, MMC has posted a profit before zakat and taxation (PBZT) of RM185 million compared to RM305 million in the corresponding quarter ended 31 December 2016. For the financial year ended 31 December 2017, the Group recorded a PBZT of RM452 million compared to RM673 million while revenue stood at RM4.16 billion compared to RM4.63 billion reported in the preceding financial year. Its Ports and Logistics division recorded higher PBZT of RM484 million compared to RM457 million and revenue of RM2.82 billion compared to RM2.74 billion reported in the preceding financial year driven by higher share of profit from Penang Port Sdn Bhd (PPSB) and additional revenue contribution from RAPID Material Offloading Facilities operations by Johor Port Bhd. The completion of 49% acquisition in PPSB and the proposed acquisition of the remaining 51% equity interest is expected to contribute positively to the group’s future earnings as it allows full consolidation of PPSB as a wholly-owned subsidiary.
Meanwhile, PPSB has allocated RM180 million for expansion works this year which will involve berth strengthening and purchase of two quay cranes for the port’s operation capacity enhancement. Chief executive officer Sasedharan Vasudevan said shareholders have approved the capex for the first phase expansion, which will allow the container terminal to increase its berth capacity to 2.9 million TEUs from the current two million TEUs. Dredging work will allow channel depth up to 11.5m from the current depth of about 11m, allowing the port operator to expand the vessel size calling its container terminal. The expansion work will take between 18 and 20 months to complete, with commencement expected by the third quarter this year. PPSB handled 1.5 million TEUs in 2017, representing about 6% y-o-y growth and is targeting to hit 1.6 million TEUs this year. The port believes that if the growing trend continues, it will be able to hit throughput 2.2 million TEUs or 2.3 million TEUs in the next four to five years.
Suria Capital Holdings Bhd (SCH), a company controlled by the Sabah state government, has dropped its plan to sell a stake in wholly-owned subsidiary Sabah Ports Sdn Bhd (SPSB) to MMC. August last year, SCH announced that it was in talks with MMC to sell a stake in SPSB, which holds a 30-year concession to operate eight ports in Sabah – Sapangar Bay Container Port, Sapangar Bay Oil Terminal, Kota Kinabalu Port, Sandakan Port, Tawau Port, Lahad Datu Port, Kunak Port and Kudat Port. The types of cargo being handled include container, dry bulk, general cargo and liquid cargo, especially palm oil and petroleum.
In 4QFY17, the port operations segment contributed 98% to SCH’s revenue and 73% to the group’s profit before tax. For the year, it contributed 97% to group revenue and 94% to the group’s profit before tax. The operations for this segment are mainly in Sabah, where ports play an important role in supporting the state’s economy as shipping is widely used to transport imports and exports.
The cargo volume handled is closely correlated to the Sabah state economy and also the regional economy. For the quarter under review, there was an increase in total tonnage handled by 9%. Total tonnage handled for the year increased by 5%, mainly contributed by higher bulk oil and general cargo throughput. The total tonnage handled for the current quarter and year ended were 8.0 million and 30.3 million metric tonnes, respectively. The category of container which is charged differently as per Sabah Ports’ Tariff registered an increase in total TEUs handled in the quarter by 1% to 90,853 TEUs from 90,140 TEUs in the preceding year’s corresponding quarter. For the year, total TEUs was 1% lower at 353,161 TEUs as compared to 357,386 TEUs registered in prior year.
SPSB will increase the handling capacity of Sapangar Bay Container Port (SBCP) to half a million TEUs per annum with the launching of two additional ship-to-shore cranes. Over just 10 years, SBCP has gone from handling a volume of containers of 105,239 TEUs using mobile harbour cranes in 2007, to 241,466 TEUs last year with two units of ship-to-shore cranes commissioned in 2011. With the arrival of the two additional units of ship-to-shore cranes which was handed over end of last year, it hopes to increase the volume to 500,000 TEUs. The two new cranes comes with enhanced feature - with maximum outreach of 45m from the centre line of seaside rail and maximum height of lift of 36m above quay level, enabling SBCP to handle bigger vessels than using the existing cranes.
To further boost the handling efficiency and capacity of SBCP, SPSB implemented a new terminal operating system for container operation last year. The system which included improvement to the wifi system and the use of tablets cost about RM7 million. In addition, a further RM80 million was invested on eight sets of prime movers with trailers, four units of rubber-tyred gantries and two units of ship-to-shore cranes. The federal government has also approved RM1.1 billion through the Sabah Economic Development Investment Authority to transform the port into a transhipment hub, which will become a game changer to spur the state’s economy. SPSB is expected to invest a further RM200 million to RM300 million on equipment to raise the total handling capacity of SBCP to 1.25 million TEUs per annum.
Meanwhile, Bintulu Port Holding Berhad (BPHB) handled a total throughput of 50.28 million tonnes of cargo last year compared to 46.45 million tonnes in 2016, an increase of 8.2%. Its chief executive officer Dato Mohammad Medan Abdullah said it is the group’s best performance since the commencement of operations, representing the third largest throughput and the highest growth rate by comparison with other Malaysian ports.
Among BPHB’s key achievements in 2017 are the safe handling of 10,000 liquefied natural gas (LNG) shipment since 1983, highest container throughput in East Malaysia with 309,000 TEUs. BPHB also managed to handle 4.22 million tonnes of palm oil, which makes them the largest palm oil-based products exporting terminal in Malaysia – handling 25.5% of Malaysian palm oil export as well as the first gassing up and cooling down (GUCD) service provider in Malaysia, and third in Asia Pacific region.
BPHB spent RM1.9 billion on the Samalaju Industrial Port project, where the first phase development commenced operations in June last year. Samalaju Port, which currently has an operational capacity of 18 million tonnes per annum, handled 2.64 million tonnes of cargo last year, compared with 450,000 tonnes in 2016, a near five-fold increase. With the additional 18 million tonnes per annum capacity from Samalaju Port, this has boosted the group’s total berth capacity to 93 million tonnes per annum.
GD Express Carrier Bhd (GDEx) intends to grow its customer-to-customer segment with a two-pronged approach, through its own GDEx outlets and retail postal firm Mail Box Etc Malaysia (MBE Malaysia). Earlier in March, GDEx announced the acquisition of MBE Malaysia for RM5.5 million.
MBE Malaysia’s principal business involves mailbox services, packaging, shipping, photocopying and printing services, typically catering to local entrepreneurs and SME operations. MBE’s business model, which also sells the services of other local and global logistics players, will be maintained after the proposed acquisition has been completed. GDEx views the acquisition as a strategic move to tap into the retail delivery service sector, which currently contributes less than 2% of the group’s total turnover. Plans earmarked for MBE Malaysia will revolve around increasing efficiencies of the company, which include forming a digitised platform, improving accessibilities and potentially become package drop points for GDEx.
As for GDEx, it targets to open 20 new branches this year and is considering to market its products through resellers. To date, there are 79 GDEx branches, while MBE Malaysia has 92 outlets located in business districts and shopping malls.
Following the signing of a new deal for its acquisition of Airpak Express (M) Sdn Bhd, loss-making Nationwide Express Holdings Bhd (NEHB) maintains it is on track for a turnaround in FY18. For FY17, NEHB saw its net loss widened to RM15.83 million from a net loss of RM6.15 million in prior year. NEHB group managing director Rozilawati Basir said in an interview that the acquisition is expected to be a catalyst of growth although the new deal is smaller than an earlier negotiated agreement. The latest deal includes Airpak’s rights, title and interest in and to its courier services business for RM15 million cash and issuance of 3 million NEHB shares.
NEHB said the acquisition is part of the group’s overall strategy to capitalise on the rapid growth in demand for e-commerce and online business activities. With the growing number of new online market places, the acquisition is timely for the company to build its capabilities and capacities in the business-to-consumer segment and thereby, enhance revenue growth from the e-commerce last mile delivery services. Currently, a large chunk of NEHB’s revenue is derived from serving business-to-business customers.
Pos Malaysia Bhd saw its net profit fell 72% to RM9.48 million y-o-y for the third quarter ended Dec 31, 2017 (3QFY18) against RM33.41 million last year. The group was hit by lower revenue coupled with higher operational costs. Quarterly revenue was lower by 2% to RM620.7 million compared with RM635.7 million a year ago. The group said its postal services segment registered lower revenue of RM170.1 million compared with RM187.1 million last year due to the decline in traditional mail volume coupled with lower transactions in retail segment from bill payments, insurance commission as well as reduction in commission rate of unit trust. For the cumulative nine months, the group’s net profit fell 11% to RM64.22 million versus RM71.99 million last year. Revenue, however, was higher by 26% at RM1.82 million compared with RM1.45 million a year ago.
Despite the challenging operating conditions, the group will continue to press ahead with its initiatives to become the premier e-commerce fulfilment and logistics services provider domestically and over time, regionally. It added that the above 5% forecasted economic growth for 2018 and the ongoing developments with respect to the DFTZ will continue to drive the rapid expansion of e-commerce domestically and regionally.
For 2018, Pos Malaysia is targeting an increase of 10% for its e-commerce trade with its unit Pos Laju delivering about 516,000 packages daily. Group chief commercial officer Nor Azizan Tarja said the projection would also see Pos Laju recording higher traffic than postal services, which is the company’s core activity. To establish a more e-commerce friendly environment, Pos Malaysia has introduced more facilities for people to pick up and drop packages as well as provide drive-through services. The group aims to install 50 additional units of Pos Laju Ezibox — its 24/7 e-commerce convenient touch points or parcel locker facility for customers to pick up parcels at their convenience — in the Klang Valley by FY19. As of March 2018, the group has 110 units of parcel lockers. The number of drive-through counters will also be doubled from 20 to 40 counters.
The rising popularity of online shopping and increasing e-commerce activities have given the courier services industry a big boost as demand for transport and delivery services soared. The arrival of Alibaba Group Holding Ltd in Malaysia — setting up its first regional logistics hub outside China in the DFTZ in Sepang — has given an added lift to the industry. This has contributed to the entry of integrated logistics players such as Century Logistics Holdings Bhd, Tiong Nam Logistics Holdings Bhd and Xin Hwa Holdings Bhd.
Century Logistics’ recent venture into the courier services business is expected to break even by 2021. Its courier services business arm currently operates 86 trucks and 11 distribution centres, at a full capacity of 7,000 parcels per day. Century Logistics’ management plans to expand rapidly and has targeted to reach 350 trucks and 25 distribution centres by the end of 2018. Once its new multi-storey warehouse becomes operational in 2019, the group’s parcel capacity is expected to be given another major boost. The three-storey warehouse will have a total floor area of 450,000 square feet. The company will carve out about 50,000 square feet on the ground floor for the business-to-consumer parcel delivery business. It will have a sorting capacity of 150,000 parcels per day and targets to achieve 100,000 parcels per day within the first three years. For the remaining warehouse capacity, it plans to fill up the space within the first six months.
Logistics giant Tiong Nam was observed to be particularly ambitious as the group expanded further down the supply chain again with their foray into the last-mile delivery space under the brand name ‘Instant’. The move follows after the group’s previous venture into the cross-border trucking scene, aimed to capitalise on the movement of e-commerce goods to-and-from Shenzhen.
Johor-based Xin Hwa, a leading land transport operator, also recently ventured into the e-commerce space via the acquisition of a 50.01% stake in China-based Yiwugou Ecommerce Sdn Bhd (YESB) for RM500,000. It has launched e5buy.com, an online platform that gives Malaysian businesses and individuals direct access to suppliers in China’s Yiwu commodity market in Zhejiang province, which could build up volume for Xin Hwa to roll out its courier service in the coming months. Yiwu commodity market is the world’s largest small commodity wholesale market with 1.8 million products by 75,000 wholesalers and retail shops. This unique platform allows direct access to Zhejiang’s five districts and ships 570,000 containers to over 200 countries.
It is worthy to keep an eye on developments in the courier services industry as the e-commerce boom will continue to drive parcel delivery volume growth, making it an attractive segment for conventional logistics players facing stagnant growth. With an increasing number of new entries, competition will surely heat up in this space, forcing rates down and encouraging differentiation.