Result

• SWIFT Haulage Berhad (SWIFT) posted RM161.9m revenue and RM15.2m PATAMI which surged 16.3% qoq and 25.3% qoq respectively. This was mainly due to the increase of revenue from all segments, in line with the resumption of operations of the Group’s customers in the quarter.

• Double-digit YoY earnings growth in FY2021. SWIFT recorded RM50.6m PATAMI for its full year FY21 which soared 21.3% yoy comparied to RM41.7m in FY20. We believe the growth was mainly due to the ease of containment measures and the spike of transportation rates in CY2021.

• Earnings meet expectation. SWIFT’s FY21 full year earnings of RM50.6m meet our earnings forecast (RM50.7m). We reiterate our FY22F earnings of RM 63.9m, a 26.3% yoy growth.

• One-off listing expenses dragged profit margin. During the quarter, The Group incurred a one-off listing expenses of approximately RM4.3m which dragged down the profit margin. Excluding the listing expense, PAT margin stood at 11.6%, +2.6ppts qoq.

• Container Haulage and Land Transportation remained as the largest contributor to the Group. Both segments accounted for 75% (Container Haulage: 43% , Land Transportation: 32%) of the total Group’s revenue whilst Warehousing and container depot (13%) and Freight Forwarding (12%) contributed the remaining 25%.

• Dividend declared. The Group has declared an interim dividend of RM 0.018 per share with the Ex-Date on 9 Mar 2022.

Comments

• Lower growth on Container Haulage, Land Transportation and Freight Forwarding for FY21 despite a low base in FY20. The Group encountered a low growth of earnings in Container Haulage (+6% yoy), Land Transportation (-11% yoy) and Freight Forwarding (+9% yoy) in FY21, no thanks to the Movement Control Order initiated by the government which impacted some of SWIFT’s customers. However, the Group was able to sustain their gross profit margin through better management of operating cost.

• Acquisition of KP Port Service set to fortify its Container Deport service. The Group has entered a MOU to acquire KP Port recently. We are optimistic on the acquisition as this is expected to enhance SWIFT’s network and services in Container Depot business and hence benefiting their customers.

• Expansion on warehouse capacity in tandem with the strong demand. With the high demand on storage space, SWIFT continues its focus on expanding their customer base with the expansion on warehouse capacity in Tebrau, Seberang Perai and Port Klang Free Zone (PKFZ) which are expected to contribute positively in FY2022. We expect to see a CAGR of 15% in revenue for Warehouse business in FY2021-FY2023.

• Cautiously optimistic on FY22 performance …..We are sanguine on SWIFT’s outlook banking on: 1) the ease of containment measure and reopening of international border which have driven the resumption of economic activities of SWIFT’s customers, b) improvement in labor market to further ease driver shortage for the Group, and c) expansion of external demand which spurred the demand for the Group’s services. Therefore, we are confident on the financial performance of the Group in FY22 with the forecast of 26.3% yoy bottom line growth.

• …… amid the downside risks. Risks which could derail the growth trajectory are: i) Elevated crude oil price pursuant to military conflict arising from Russia-Ukraine tension, which would increase the operational cost of SWIFT and subsequently dent its margin, ii) Shortage of driver for its container haulage and land transportation services which could render an adverse impact to the Group’s operation, and iii) Weaker-than-expected economic recovery as the new Covid variant spreads widely and prolong supply chain disruption.

Earnings Outlook/Revision

• We reiterate our PATAMI forecast for FY22F at RM63.9m with the expectation of full recovery of domestic economic activities. Furthermore, we introduce our FY23F PATAMI forecast on RM68.9m with 8% yoy growth on the back of high base in FY22F due to envisaged on strong rebound of economic and new warehouse earnings contribution.

Valuation/Recommendation

• We ascribe a lower PER on 15x (16.5x previously), in line with its industry peers, which are currently trading at 12-15x 1-yr forward PE. We are mindful of headwinds such as elevated crude oil prices, shortage of driver and weaker-than-expected economic recovery.

• We maintain BUY CALL on SWIFT but with lower target price of RM1.08 (from RM1.18) due to lower PER assigned with the abovementioned downside risks. Our target revised target price of the stock still renders 38% upside against the current share price of RM0.78.

Source: JF Apex Securities Research - 25 Feb 2022