Another miss; trimmed forecasts but maintain HOLD

Swift’s 1H23 core net profit (CNP) of MYR16.2m fell short at only 34%/31% of ours/consensus’ FY forecasts. We slash FY23/24/25E CNP by 28%/26% /24% as we reflect higher costs of sales, depreciation and interest expense in our projection. We tweaked our TP to MYR0.52 (from MYR0.51) as we roll forward our valuation base year to FY24E, pegging to an unchanged EV/EBITDA multiple of 7.0x, in-line with its peers’ 5Y hist. median. HOLD.

1H23 CNP plunge -36% YoY on high overheads

1H23 CNP slump by -36% YoY to MYR16.2m despite revenue growing by +3% YoY to MYR329.9m, on higher finance costs, depreciation and overheads. Revenue growth was largely driven by land transportation (LT: +13% YoY) and warehousing & container depot segments (W&CD: +20% YoY) from new capacity added in FY22, partly offset by weaker container haulage (CH: - 5% YoY) and freight forwarding revenue (FF: -13% YoY). In terms of operating performances, margin improvements from W&CD partly cushioned the underperformance of CH and FF segments; the former, we believe was attributed to higher margin from own vs. leased warehouses and improved utilisation for container depot.

QoQ, margin contraction for W&CD and FF segments

QoQ, Swift’s 2Q23 CNP fell 22% on lower revenue (-5% QoQ) and lower margins on higher costs of sales, depreciation and finance costs. Lower margins were mainly from W&CD and FF, partly cushioned by CH segment.

Cautious outlook but largely reflected in share price

We remain cautious on Swift's outlook following 4 consecutive quarters of earnings misses. Although we anticipate continued growth in its W&CD due to recent capacity expansions, the uptake rate may be slow. The CH and FF segments are being negatively impacted by macroeconomic headwinds, posing downward risks to the volume handled and rev/unit. Having said that, we believe its depressed share price has largely reflected the headwinds.

Source: Maybank Research - 21 Aug 2023