The Transportation and Logistics Sector Has Potential to Rise

STOCK MARKET - JAKARTA. The potential for economic slowdown and geopolitical tensions that could clog the industrial supply chain still loom over the transportation and logistics sector this year. These factors could pose challenges, as well as opportunities for issuers engaged in this sector.

Supply Chain Indonesia (SCI) predicts that the performance of the transportation and logistics sector in terms of value could reach IDR 1,436 trillion in 2024, growing 14.16% compared to last year.

CEO of Supply Chain Indonesia, Setijadi, revealed that this estimate includes passenger and goods transportation, as well as warehousing.

SCI estimates that the main drivers of this sector come from the processing industry, agriculture, trade, mining, and construction.

"In addition to contributing significantly to economic growth, the logistics sector has the potential to boost the growth of other sectors through increased effectiveness and efficiency," Setijadi told Kontan.co.id, Monday (22/1).

Investment Consultant of Reliance Securities Indonesia, Reza Priyambada agrees that the transportation and logistics sector is a supporter of the economic wheel, as a link from one industry to another. Therefore, the performance of companies in this sector cannot be separated from the level of mobility and consumption of the community and the performance of the manufacturing industry.

"The increasing purchasing power also indirectly supports their growth. This is part of supply chain management to meet market demand. So, there will be many activities involved," said Reza.

Equity Research Analyst of Kiwoom Securities Vicky Rosalinda added, the performance of transportation and logistics issuers can be driven by the projected growth of the Indonesian economy which is projected to reach 4.7% - 5.5% in 2024. Another important catalyst is the General Election and Presidential Election which could have a positive impact on this sector.

Junior Research Analyst of Pilarmas Investindo Securities Arinda Izzaty Hafiya added, there are several factors that can boost the performance of transportation and logistics issuers. Among others are the growth of e-commerce, the continuation of infrastructure development, and an increase in investment in the warehousing sector.

However, there are challenges or risks that overshadow this sector. Especially due to the geopolitical effects related to conflicts in the Red Sea region.

"For ships that avoid the Red Sea, of course, the route taken will be longer and require more fuel, and delivery will take longer," said Arinda.

Analyst of Samuel Securities Indonesia Daniel Widjaja highlighted the same thing. To take an alternative route, indeed additional costs are needed. But on the other hand, there will be an increase in transportation rates, especially for cargo ships.

Thus, issuers engaged in this logistics segment can seize opportunities from this situation. However, the issuer's business strategy will be crucial in order to grow profit margins amid rising revenues and expenses.

Short-Medium Term Choices

However, Daniel warns that sentiment from this geopolitical factor is only short to medium term. So that shares of issuers in the transportation and logistics sector can currently be selectively considered as trading options.

From the stock movement side, the transportation and logistics index is reversing direction at the beginning of this week. When the Composite Stock Price Index (IHSG) strengthened by 0.28%, IDX Transportation & Logistics actually weakened by 1.65% on Monday (22/1).

IDX Transportation & Logistics fell the deepest daily compared to other sectoral indices. In fact, until the end of last week, this sector was still the sectoral index with the fastest rate. Year to date, the current increase has been cut to 3.26%.

According to Vicky, this condition could actually be a momentum to collect stocks with valuations that are still relatively cheap.

Vicky considers PT Blue Bird Tbk (BIRD) and PT Adi Sarana Armada Tbk (ASSA) as attractive options with a buy on weakness strategy. The target price for each is at IDR 2,290 and IDR 965.

Arinda also champions BIRD and ASSA stocks, with short-term targets at the IDR 1,800 - 1,880 level and IDR 825. Then, buy shares of PT Samudera Indonesia Tbk (SMDR) with a short-term target at the IDR 390 level.

Meanwhile, Daniel is looking at SMDR and PT Temas Tbk (TMAS) stocks. While Reza chooses SMDR, ASSA and PT Indomobil Multi Jasa Tbk (IMJS) stocks.