Trimming earnings and TP

Swift Haulage’s (Swift) 9M22 core net profit (CNP) of MYR36.1m (+55% YoY) came in below expectations at 65%/66% of ours/consensus’ FY forecasts. We trim CNP by 7% each in FY22E-24E, as we reflect higher fixed costs in our projection. We tweaked our TP down slightly to MYR0.64 (vs. MYR0.65 previously), pegged to an unchanged EV/EBITDA multiple of 7.0x, in-line with its peers’ 5-year historical EV/EBITDA median multiple. Maintain BUY.

9M22 CNP +55% YoY as COVID-19 restrictions eased

9M22 CNP improvement (+55% YoY) was inline with the higher revenue (+11% YoY), mainly driven by easing of COVID-19 restrictions and recovery of business activities. All operating segments recorded improved revenue, ie. container haulage (+3% YoY, could be due to higher blended rates from higher costs pass thru, but EBIT was down -15% YoY), land transportation (+23% YoY, on the back of higher cross border trips and improved rates), warehousing & container depot (+9% YoY post capacity expansion), and freight forwarding (+16% YoY, we believe was due to more jobs handled).

3Q22 CNP -13% QoQ from lack of festive demand

3Q22 CNP however shrank 13% QoQ to MYR10.8m, due to lower contribution from land transportation and freight forwarding segments. Slower land transportation EBIT (-11% QoQ) was attributed to the lack of festive season in 3Q22, which had affected the volume from fast moving consumer goods customers; while slower freight forwarding EBIT (-11% QoQ) was dragged by the lower freight rates.

New warehouse capacity contribution to materialise

Moving forward, the group expects volume will continue to be supported by stable demand from domestic shipping between East and West Malaysia. It also expects contribution from newly added warehouse capacity (completed in 3Q22) to gradually materialise, as it focuses on its strategy to expand its customer base domestic and regionally via opportunistic merger and acquisitions amidst increasingly challenging operating out.

Source: Maybank Research - 15 Nov 2022