Result

• SWIFT Haulage Berhad (SWIFT) posted a flattish revenue of RM160.1m, -0.1% qoq but a much lower PATAMI of RM13.2m, -7.9% qoq, mainly due to higher administrative and operating expenses in 2Q22.

• Better YoY performance as the sign of recovery of economy. SWIFT’s 1H22 revenue grew 7.8% yoy and PATAMI soared 23.4% yoy mainly benefitted by the easing of containment measurement and recovery of business and economic activities which ultimately translated to a higher business volumes for current FY.

• Earnings in line with expectation. SWIFT’s 1H22 earnings is deemed in line with our expectation although the PATAMI accounted for 43%/44% of our/consensus full year earnings forecast as management has guided us that weak sales volume in April and May was mainly due to 90% of their drivers are Muslim and affected by the fasting month and Hari Raya. We are expecting 2H22 to have better performance than 1H due to seasonally effect.

• Container Haulage accounted for main contributor for total revenue while Freight Forwarding business as the largest contributor to bottom line. Container Haulage accounted 43% of the total revenue but the Freight Forwarding business contributed larger portion to the total profit (42%). This was mainly due to the higher margin in Freight Forwarding Business compared to others segment.

• Margin of Freight Forwarding remained strong. In this quarter, Freight Forwarding registered 55% PBT which registered further growth of 5.2ppts qoq and 17.9ppts yoy. Nonetheless, we reckon the margin of Freight forwarding will be gradually normalize moving forward in 2H22 on the back of increased supply of global fleet size which dented the international freight rates.

• Warehousing business started contributing to topline with completion of expansion. The expansion of warehouse has started to contribute to the topline of the Group as the Tebrau and Seberang Prai extended warehouse had commenced its operation in the quarter and space increased to 309k sqft in total. The PKFZ integrated warehouse is expected to commence its operation in next quarter (3Q22). 2Q22’s warehousing and container depot revenue increased 6% qoq and 4% yoy.

• Dividend Declared. The Group has declared its first interim dividend of 1sen/share and will be paid on 21 Oct 2022. Our FY22 full year dividend forecast is stood at 2.5sen/share

Updates

• Expanding footprint into Singapore. The Group has proposed to acquire Watt Wah Petroleum for a consideration of total SGD 10.1mil (approximately RM 32.7mil) compromising RM5.2m cash and RM27.5m repayment of shareholder’s loan. Watt Wah is principally involved in chartering, forwarding, and transporting petroleum products. The management has highlighted on the proposed acquisition is a strategic move to expand into Singapore and in line with their strict criteria of potential M&A which the synergistic move that will complement our inland distribution, cross border and freight forwarding segments. The acquisition is expected to decrease the cash balance, slightly increase the net gearing and bottom line upon the completion of acquisition. However, we didn’t adjust our forecast regarding this as the acquisition is pending for acceptance by the seller.

• Disposing land in Klang. Swift announced on 16 Aug 2022 to dispose an industrial land in Bandar Sultan Sulaiman measuring 4.8 hectares for RM 38.36mil. The disposal provides the Group to unlock the value of non-core asset as the land is not in the part on their warehousing expansion plan. Meanwhile, it provides the surplus cash flow from the sales and the proceeds are expected to be utilised in repayment of borrowings and lead to lower gearing. The gain on disposal is expected to record a RM4.4mil one off gain in FY23 bottom line upon the expected completion date of 2Q23. Meanwhile, there are able to decrease Swfit’s gearing ratio around 5%-8%.

• Sustainable development. The Group has entered a MoU with Volvo Malaysia promote and introduce electric trucks in Malaysia to support the sustainability objectives in Malaysia which are anchored on commercial Electric Vehicle Trucks, human capital development and competency, electric trucks know-how and technology sharing. Besides, the Group has installed a 400.05 Kw power capacity on Tebrau warehouse.

Comments

• Expansion on track. Warehouse capacity will increase by 46% in total upon the completion of PKFZ warehouse and we opine this is a good timing as the current warehouse utilization rate is near to max. Meanwhile, the Group is aiming to continue growing their logistic capacity via M&A activities, such as the acquisition of Watt Wah Petroleum in Singapore.

Source: JF Apex Securities Research - 18 Aug 2022