SWIFT’s FY22 results met our forecast but beat consensus estimate. It benefitted from: (i) the economy reopening, (ii) brisk transportation of petrochemical products amidst high crude oil prices, and (iii) strong gateway volume on the back of an export boom. We maintain our forecasts, TP of RM1.00 and OUTPERFPORM call.

FY22 core net profit met our forecast but beat consensus estimate by 6%. It declared a second interim NDPS of 1.0 sen (ex-date: 22 Mar; payment date: 23 Mar 2023) in 4QFY22 vs. 1.80 sen paid in 4QFY21, bringing FY22 total NDPS to 2.00 sen (FY21: 1.80 sen), within expectation.

YoY, FY22 revenue grew strong (+9%) driven by: (i) recovery in business activities on the easing of Covid-19 restrictions, while the transportation of petrochemical products, particularly for the Petronas group of companies (close to 20% of revenue), was brisk on the back of strong crude oil prices, and (ii) strong gateway volume on the back of robust exports by local manufacturers spurred by MYR weakness (also manifested in a 9% YoY growth in gateway volume during the same period). Despite higher effective tax rate of 19.7% (compared to 15.5% in FY21), core net profit rose 7% (excluding one-offs at RM6.6m).

QoQ, 4QFY22 revenue rose 4% driven by festivities (i.e. Deepavali, Christmas, and usual year-end sales) resulting in stronger demand for all its division, namely container haulage (+2%), freight forwarding (+9%), warehouse, container depot (+8%), and especially for land transportation (+22%). Core net profit, however, fell by 6% mainly due to higher interest expenses incurred.

Expansion continues. SWIFT has completed the expansion of its warehouses in Tebrau (from 108k sq ft to 308k sq ft), Seberang Prai (from 113k sq ft to 222k sq ft), and building a warehouse in Port Klang Free Zone (178k sq ft), as well as commenced providing warehouse management and transportation services in Pengerang for Petronas (c.1.17m sq ft). It is in the midst of expanding its cold chain warehouse in Sabah (from 27k sq ft to 57k sq ft, completion by 1QCY23), warehouse in Mak Mandin, Penang (150k sq ft, within 2023), and Pulau Indah, Selangor (250k sq ft, within 2023).

Maintain OUTPERFORM with a TP of RM1.00 based on FY23F PER of 14x which is in-line with the average forward PER of local logistics companies (i.e. TASCO, and TNLOGIS). There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 4).

We like SWIFT for: (i) its leading position in the Malaysia haulage market commanding close to 10% share, (ii) its value-adding integrated offerings resulting in a superb pre-tax profit margin of 10% compared to industry average of 4%, and (iii) the tremendous growth potential of its warehousing business, riding on the booming domestic e-commerce.

Risks to our call include: (i) sustained high fuel cost, (ii) global recession hurting the demand for transportation service, and (iii) delays in its primary warehousing expansion plan.

Source: Kenanga Research - 28 Feb 2023