Logistics in Malaysia: Market overview and M&A trends

October 2018
By Yennie Tan, Partner and Deals Strategy Leader, PwC Malaysia

Overview

The logistics industry in Malaysia has evolved in recent years, underpinned by strong growth enablers such as better logistics infrastructure, increasing freight volumes and a structural growth in e-Commerce. Correspondingly, the recent wave in M&A activity within the logistics sector has been driven by a focus on niche segments such as cold chain, and the ambition to achieve greater network and scale, not least to capitalise on the e-Commerce wave.

While the current market landscape is still fragmented with a large number of players across the value chain, market consolidation is expected, with the expected emergence of two broad categories of logistics providers – particularly large integrated logistics players who are able to capitalise on their scale and reach, and players focused on niche market segments.

Scale and focus on niche markets

Achieving scale and the ability to provide a comprehensive network and services is key, with selected players having a focus on niche segments in order to increase breadth of service offerings and benefiting from higher margins. While niche segments such as cold chain logistics require significantly more capital investments, it also offers the potential of higher margins and revenue growth, underpinned by growing demand from industries such as pharmaceuticals.

Establishing a regional network and e-Commerce logistics

The global e-Commerce market is poised for growth, and Malaysia is no different. The CEP (Courier, Express and Parcels) segment of the market has recorded a CAGR of 14% from FY11-FY16. The outlook of the e-Commerce logistics sector is premised on gaining the breadth of network (local and regional) and scale, through the formation of:

strategic alliances amongst e-Commerce players and logistics providers;
consolidation and integration to achieve scale; and
investments in logistics infrastructure such as warehousing, technology and e-fulfilment hubs

With increased investments and growth in e-Commerce expected in Malaysia and across the region, the need for an extensive logistics network is imperative, although it remains to be seen how expediently a comprehensive logistics infrastructure, similar to that of China or the US, can be developed.

Conclusion

Overall, positive market growth drivers, coupled with government support through the strengthening of regulation, reduction of red tape and the establishment of the Digital Free Trade Zone (DFTZ) further lends support to the growth in this sector. M&A activities are expected to be concentrated around the key areas of e-Commerce logistics, achieving scale and niche markets.

View our full discussion paper “Logistics in Malaysia: Market overview and M&A trends”