• Maintain HOLD (TP: RM0.53). Swift’s 1HFY24 Core PATAMI of RM16.5mn (- 16.7% YoY) was below both ours and consensus full year estimates, accounting for only 37.5% and 38.4% respectively. The deviation against ours was mainly due to higher-than-expected operational costs. In 2QFY24, Swift’s Core PATAMI dropped 14.3% YoY to RM8.3mn, despite an increase in revenue, primarily due to higher costs in sales and services operations. The GP margin declined to 26.6% (-2.2 ppts QoQ, -3.0 ppts YoY). Consequently, we have revised down our FY24- FY26 earnings forecast by 10%-15%. While the outlook remains cautiously optimistic, improvements in the Warehousing and Depot segments are expected in 2H24 onwards, driven by better utilization rates. Swift has declared an interim DPS of 0.8sen, and we estimate the total FY24f DPS to be 1.6sen, translating into a DY of 3.1%. Maintain HOLD call with a lower TP of RM0.53 (from RM0.55), based on a PER of 11x and rolled forward to FY25 EPS of 4.8sen.

• Key highlights. Swift’s 2QFY24 revenue increased by 4.7% YoY to RM172.9mn, driven by higher volumes and capacity across all segments except freight forwarding (refer to table 2). The most significant growth came from the Warehousing & Container Depot segment (+11.6% YoY), attributed to expanded warehouse capacity. However, Core PATAMI decreased by 14.3% YoY to RM8.3mn, as most business segments experienced margin contractions due to higher costs in sales and services operations, except for Warehousing & Container Depot. On a QoQ basis, Core PATAMI increased slightly by 1.5%, despite a 3.6% decline in revenue. This was offset by lower overhead costs and higher other income earned.

• Earnings Revision. We revised down our FY24-FY26 earnings forecast by 10%- 15% as we increased our cost assumption and lower margin expectations.

• Outlook. We remain cautiously optimistic on Swift’s prospects, amidst heightened competition and prevailing macroeconomic challenges that could impact volume and business growth. However, we expect 2H24 earnings to improve in the Warehousing and Depot segments, driven by better utilization rates. Swift’s Westport Warehouse (269,000 sqft) has secured a customer (70% Sharp Electronics, 30% FMCG customer), and completed the acquisition of Perai Warehouse, Penang (118,000 sqft). These additional warehouses will bring the total warehouse capacity to around 1.7mn sqft, with an expected utilization rate of 80% by the end of 2024.

Source: BIMB Securities Research - 12 Aug 2024