SWIFT is actively talking to potential tenants to fill up its new warehouses in both Port Klang Free Zone (PKFZ) and Johor Port. It will expand its warehouse space by another 1.8m sq ft (+29%) in FY24. Meanwhile, the outlook for Its land transportation unit is positive underpinned by stable activities at Pengerang and continued container volume growth at Port Klang. We maintain our forecasts, TP of RM0.97 and OUTPERFORM call.
The key takeaways from SWIFT’s 1QFY23 results briefing yesterday are as follows:
1. SWIFT provided insight into the high overheads that had weighed down on its latest quarterly performance, i.e. a 10% increase in its staff strength to 3,621 from 3,300 prior to the expansion (1QFY23 staff cost at 10% of revenue, up from 8% of revenue in 1QFY22). The additional staff cost will eventually be passed through to the customers as and when the warehouses are gradually filled up. As such, SWIFT has guided for better margins ahead as it projects the occupancy rate of its warehouses to return to above 80% by 2HFY23.
2. SWIFT echoed, once again, WPRTS’s guidance for a container volume growth of 0% to +5% for FY23, and single-digit growth for FY24. In the event of a global recession, it holds the view that it will be brief and shallow. As SWIFT depends more on gateway cargoes (compared with transhipment cargoes of WPRTS), it has stronger earnings visibility. We are keeping volume growth assumptions of 7% each for both FY23 and FY24, for its container haulage segment.
3. The overall occupancy rate of its warehouses has fallen to 75% (from an average of 85% a year ago) due to: (i) the high base following the inclusion of the newly completed PKFZ warehouse (178k sq ft) (in Dec 2022) into the calculation, and (ii) a slight retracement in the occupancy of its new warehouse in Johor Port as the demand for space from a major customer specialising in sanitiser related products has eased. It is in the midst of moving its tenants currently housed in third-party warehouses (50k sq ft) to the newly completed PKFZ warehouse that will immediately boost the PKFZ warehouse’s occupancy rate to 30%. Meanwhile, it is also actively talking to potential tenants to take up the unfilled space in both the PKFZ and Johor warehouses. It expects the overall occupancy rate of its warehouses to return to 80% to 90% by 2HFY23. We are keeping our assumptions of warehousing space of 1.4m sq ft in FY23 (+6%) and 1.8m sq ft in FY24 (+29%).
4. SWIFT reiterated that its land transportation business will continue to be driven by the increase in transportation services at Pengerang for Petronas with stable production level expected for 2023/2024. In addition, there is rising demand from key customers (i.e. IKEA and Lotus’s) on the recovery in the local retail sector. We are keeping our growth assumptions of 4% each for both FY23 and FY24, for its land transportation segment.
Still in expansion mode. 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 Port Klang Free Zone warehouse (178k sq ft), as well as commenced warehouse management and transportation services in Pengerang for Petronas (c.1.17m sq ft).
Source: Kenanga Research - 12 May 2023
Created by kiasutrader | Sep 27, 2023
Created by kiasutrader | Sep 26, 2023