Hopes on 4Q seasonality strengths; maintain HOLD

Swift’s 9M23 core net profit (CNP) of MYR18.3m fell short at only 54%/41% of ours/consensus' FY forecasts. The key variance came from overhead costs from recent business expansion and ESOS. However, we are keeping our forecasts as we await guidance in an upcoming results briefing. 4Q is always seasonally stronger, coupled with the normalization of overhead costs post-business streamlining. We maintain our TP of MYR0.52 based on 7.0x FY24E EV/EBITDA, in line with its peers' 5Y hist. mean.

9M23 CNP -49% YoY; CH and FF slowed

9M23 CNP slumped by -49% YoY to MYR18.3m (after adjusting for MYR29.9m +ve one-offs, including a gain on a bargain purchase of MYR25.5m), despite a +4% YoY growth in revenue. The CNP decline was attributed to higher ESOS costs, overheads, depreciation, and finance costs. The revenue growth was primarily driven by the land transportation (LT: +14% YoY) and warehousing & container depot (W&CD: +22% YoY) segments due to new capacity additions, partially offset by weaker performance in container haulage (CH: -5% YoY) and freight forwarding revenue (FF: -13% YoY).

3Q23 CNP -70% QoQ; LT underperformed

QoQ, Swift’s 3Q23 CNP fell by 70% despite a +5% QoQ growth in revenue, largely dragged by higher ESOS costs, overheads, and finance costs. The LT segment underperformed due to contracting margins.

Cautious outlook but largely reflected in share price

We remain cautious on Swift's outlook following 5 consecutive quarters of earnings misses. Although we anticipate 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 rates and volume handled. Having said that, we believe its depressed share price has largely reflected the headwinds.

Source: Maybank Research - 9 Nov 2023