Initiate coverage with BUY; TP of MYR0.65 We initiate coverage on Swift Haulage with a BUY rating and a TP of

MYR0.65, pegged to an EV/EBITDA multiple of 7.0x, in-line with its peers’ 5-year historical EV/EBITDA median multiple (median used to exclude data skewness from volatile earnings). The group’s near-term growth is underpinned by its recent capacity expansion, ie. the addition of 30 new prime movers, ongoing warehouse expansion, and new venture into cold chain logistics. Over the longer-term, Swift Haulage will focus on its strengths to grow its business via M&A activities, wallet share increase, and capitalising on its strategic vacant land banks to generate returns.

A market leader in integrated logistics services Swift Haulage is a leading integrated logistics service provider, operating

in segments such as container haulage, land transportation, warehousing & container depot and freight forwarding. Its strengths lie in its ability to create value through successful M&As, vast network of coverage, significant market share, and high operational efficiencies (as reflected in its superior margins vs. industry peers). The group has established a strong relationship with its blue-chip clientele, which offer a stable and resilient revenue stream, and opportunities for wallet share increase.

Proxy to supply chain logistics investment The demand for supply chain logistics has increased significantly, partly

driven by the rise of e-commerce, coupled with the trend towards supply chain integration by global businesses to establish a resilient and reliable fulfilment system. This has been accelerated by the pandemic, and Swift Haulage is well-positioned in the market (with its asset-owning business model) to ride on the tailwinds in order to capture the growth in the longer term.

Forecasting FY21-24E core net profit CAGR of 11% We are projecting Swift Haulage’s core net profit (CNP) to grow by a 3-

year FY21-24E CAGR of 11%, underpinned by its recent capacity expansion and recovery from a low base due to pandemic-induced disruptions. These will also contribute to margin improvement, thanks to improved operational efficiencies and better economies of scale. At the current price, the stock is trading at a forward PER of 7.5x, a significant discount to the industry’s median historical PER of 14.3x. While the group does not have a dividend policy, it strives to maintain a payout of 30% of its net profit and maintaining its net gearing level at 0.8x-1.0x.

Source: Maybank Research - 27 Sep 2022