A moat that is difficult to deal with. Being the largest haulier in Malaysia by total container volume handled, SWIFT’s competitive edges (vast network of coverage and economies of scale) have served as a moat safeguarding its market leadership position (9.2% vs second largest: 2.8%). Having in-house vehicle fleet and drivers (unlike peers who rely on third-party outsourcing) at their disposal, this allows SWIFT to have control over the availability and customization of its services, mode of delivery and scheduling. This, coupled with its sizable asset, allowed SWIFT to establish a long -term relationship with the blue-chip clientele, who have big volumes of demand with a high standard service requirement that small players cannot cater to. As a result, the combination of high volume demand and economies of scale has propelled the group to achieve exceptionally high utilization rate for its vehicles, resulting in superior margins as opposed to smaller peers.

Growing alongside new warehouse capacity. Apart from the group’s bread and butter haulage and transportation segments (76.1% of FY21 sales), warehousing and container depot, which accounted for 13.1% of FY21 sales, will be a major growth drivers as well, underpinned by gradual ramp up in the newly expanded warehouse capacity in Tebrau, Seberang Perai and Port Klang. In light of sturdy warehouse demand driven by the just-in-case inventory model, SWIFT is planning to build three more warehouses (Sabah Cold chain, Penang and GVL Shah Alam) in 2023-24, adding c.50% of the group warehouse capacity.

Market leader with undemanding price tag. After plunging 57% from a 52-week high of RM1.13 to RM0.48 (below the IPO price of RM 1.03), we reckon the risk-reward ratio has turned attractive, supported by undemanding 7.5x FY23 P/E (62% and 47% discount against KLTRANS’s forward P/E of 20x and peers average of 13.9x, respectively). Judging from the group’s leading position in container haulage space coupled with its superior margin, we believe SWIFT’s current valuation is undemanding.

Uptick bias. Technically, SWIFT is trading above strong support area of RM0.42 -0.45, with indicators showing uptick bias. A successful breakout above RM0.50 hurdle will spur the price toward RM0.53-0.57-0.60 levels. Cut loss at RM0.0.41.

Source: Hong Leong Investment Bank Research - 28 Oct 2022