Earnings miss; cut forecasts and TP

Swift Haulage’s (Swift) 1Q23 core net profit (CNP) of MYR9.1m came in below expectations at 17%/16% of ours/consensus’ FY forecasts. We trim CNP by 10%/9%/9% for FY23/24/25E as we reflect higher overhead costs in our assumptions. We lower our TP by 12% to MYR0.51 (from MYR0.58), pegged to an unchanged EV/EBITDA multiple of 7.0x, in-line with its peers’ 5Y hist. EV/EBITDA median multiple. We D/G Swift to HOLD from BUY.

CNP plunge -30% YoY on high overheads

1Q23 CNP slump by -30% YoY to MYR9.1m despite revenue grew +6% YoY to MYR160.3m, as margin contracted on higher finance costs and overheads. Revenue growth was largely driven by land transportation (+20% YoY) and warehousing & container depot segments (+14% YoY) from new capacity in FY22, partly offset by weaker container haulage (-2% YoY) and freight forwarding segments (-15% YoY). In terms of operating performances, all segments saw margin compression except for warehousing & container depot, which we believe was attributed to higher margin from own vs. leased warehouses and higher utilisation for the container depot.

Margin contraction for CH and FF segments

QoQ, Swift’s CNP dipped (-4% QoQ) despite revenue improved (+3% QoQ), as margin compressed on higher finance costs and overheads. Margins weakness were mainly from container haulage and freight forwarding segments, partly cushioned by improving land transportation and warehousing & container depot revenues (on commencement of new warehouse operations).

D/G on cautious outlook

We have become more cautious on Swift's outlook following 3 consecutive earnings misses. Although we anticipate continued growth in its warehousing segment due to recent capacity expansions, the uptake rate may slow. The container haulage and freight forwarding segments are being negatively impacted by macroeconomic headwinds, which pose downward risks to the volume handled and rev/unit. [Prior:BUY]

Source: Maybank Research - 11 May 2023