Swift Haulage Berhad (Swift) 1HFY23’s PATAMI of RM19.9mn (-27.8% YoY) was below our and consensus estimates accounting for only 37% and 39% of full year forecast respectively. The deviation against our forecast was mainly due to the higher-than-expected depreciation, finance cost and operation costs. Hence, we revised our assumption and earnings forecast lower, cut by 15%/12% for FY23/FY24F. Nonetheless, earnings outlook is expected to be lifted by recovery in domestic economic activities supported by its warehouse expansion plan. Maintain BUY on Swift, with lower TP of RM0.58.

• Below expectations. Swift’s 1HFY23 PATAMI of RM19.9mn (-27.8% YoY) trailed our and consensus’ expectations, accounting for only 37% and 39% of full year forecast. The deviation against ours was mainly due to higher-thanexpected depreciation, finance and operation costs.

• Dividend. Declared first interim DPS of 0.8 sen (vs 1HFY22: 1.0 sen). We estimate total FY23f DPS of 1.7 sen, translating into a DY of 3.6%.

• QoQ. Swift's 2QFY3 revenue marginally increased by 0.2% to RM165.1mn, supported by growth in the Warehousing & Container Depot segment (+13.4% QoQ) and the Freight Forwarding segment (+6.2% QoQ), which offset the -4.9% QoQ drop in the Container Haulage segment. However, PATAMI declined by 4% QoQ to RM9.7mn, mainly due to higher depreciation and finance costs.

• YoY. Revenue grew by +3.1% YoY, primarily driven by robust performances in the Land Transportation segment (+11.3% YoY) i.e., from fleet expansion and the higher Warehousing & Container Depot segment (+26.7% YoY) due to increase in warehouse capacity. These contributions more than compensated for the slowdown in the Container Haulage (-6.4% YoY) and Freight Forwarding segment (-11% YoY). Nonetheless, PATAMI dropped by 26.3% due to higher depreciation from fleet and warehouse expansion, increased finance costs, and higher overhead expenses. As a result, profit margin decreased by 2.3 ppts YoY.

• Outlook. Swift's earnings outlook is expected to improve with the recovery of domestic economic activities, supported by its expansion plan involving additional prime movers and ongoing warehouse expansion. While shortterm container haulage operations may remain subdued, this is expected to be offset by improvements in the warehousing segment as new warehouse utilization picks up. By FY24, Swift aims to increase its warehouse capacity by 400k sq ft (+30%).

• Forecast. We revised down our FY23/FY24 earnings forecast by 15%/12% as we increased our depreciation, finance cost and operation cost assumptions.

• Our call. Following the earnings revision, our TP is lowered to RM0.58 from RM0.60). Our valuation is based on unchanged 10x PER and rolled forward to FY24 EPS of 5.8 sen. We maintain BUY call and continue to like Swift due to its dominant player in the haulage business, above industry average profit margins and strong commitment to implementing ESG initiatives.

Source: BIMB Securities Research - 21 Aug 2023