Result

• SWIFT Haulage Berhad (SWIFT) posted a RM160.3m revenue, -1.0% qoq whilst recorded PATAMI of RM 14.3m, -5.7% qoq. This was mainly due to the seasonal factor as Q1 had a relatively short working period as result of long public holiday.

• Better YoY performance benefiting from economic recovery. SWIFT’s 1QFY22 revenue grew 4.7% yoy and PATAMI soared 34% yoy mainly benefiting from the easing of containment measurement and recovery of business and economic activities which translated to a higher business volumes in the quarter.

• Earnings in line with expectations. SWIFT’s 1Q22 earnings are considered meeting the expectations as the PATAMI accounts for 22%/23% of our/consensus full year earnings forecast given that Q1 usually has the weaker performance with short working period. Hence, we shall expect a stronger results in the remaining quarter to meet our forecast.

• Container Haulage and Land Transportation were the main contributors of total revenue. Container Haulage business accounted for 45% of the total revenue, recording RM71.1m topline (+3% qoq but -2% yoy). Meanwhile, Land Transportation business accounted for 33% of the total revenue, clinching RM52.5m topline (+0.1% qoq and +10% yoy) in the quarter.

• Superior profit margin of Freight Forwarding business. Freight Forwarding business accounted for 11% of the Group’s total revenue but delivered high PBT margin of 49%, +2.3ppts qoq and +8.6ppts yoy. Thus, this prompted the segment as a largest contributor in bottom line which accounted for 38% of total PBT. The surge in margin was thanks to the elevated international freight rate.

• Flattish Warehousing and Container Depot performance while awaiting new warehouse capacity. The Warehousing and Container Depot business recorded RM19.2m revenue (-12% qoq and +1% yoy) and RM2.2m PBT (-31% qoq and -13% yoy) in the quarter. We believe the segment would improve in the coming periods upon the completion of the new warehouse.

Comments

• Expansion on track. SWIFT has been focusing on broadening their customer base domestically and regionally to improve the overall cost structure. The Group has purchased 30 more prime mover from Volvo Trucks to support the newly extended warehouse in Seberang Prai, Penang and expansion in Taiping with new branch operations.

• Warehouse expansion expected to see positive earnings contribution and provide synergy in current FY. The Group’s on going warehouse expansion in terms of capacity enlargement including 200Ksqft, 109ksqft in Seberang Prai, 178k sqft in PKFZ all these will be completed and operation commenced in FY22. The total warehouse capacity will be increased by 46% and is expected to contribute positively to FY22 revenue and profit. Meantime, the expansion of warehouse capacity is able to provide synergy to the land transportation and haulage business of the Group.

• Outlook to be continued driven by strong external demand and recovery of domestic economic activities. The business performance of the Group is expected to be further underpinned by the recovery of economic activities, strong external trade, uplifting of containment measurement, reopening of international border, stimulus and relief such as special withdraw of EPF by government.

• Expect Freight Forwarding margin has peaked. We estimate the margin of Freight forwarding will gradually normalize moving forward in 2HFY22 on the back of increased supply of global fleet size which dented the international freight rates.

• Downside risks persist. The global supply chain disruption has deteriorated, exacerbated by the external headwinds such as Ukraine-Russia conflicts and zero covid strategy of China. The supply chain disruption may affect the production of business and adversely impact the business volume of the Group. Other downside risks include shortage of driver and slowing down of economy as a result of tightening monetary policy.

Earnings Outlook/Revision

• We reiterate our PATAMI forecast for FY22F at RM63.9m (+26% yoy) and introduce FY23F PATAMI forecast of RM 68.9m (+8% yoy) with the expectation of recovery of domestic economic activities and factoring the expansion on warehouse capacity.

Source: JF Apex Securities Research - 23 May 2022