Maintain forecasts and HOLD rating

We maintain our earnings forecasts and TP of MYR0.52 for Swift Haulage (Swift), based on 7.0x FY24E EV/EBITDA, in line with its peers' 5Y hist. mean. Yesterday, Swift launched its new eco-friendly warehouse and haulage office in Westports and announced the signing of an integrated logistics service agreement with Sharp Electronics Malaysia for the provision of warehousing, storage, and handling services. Maintain HOLD.

New warehouse could increase segment rev. by 10%

The new Westports warehouse has a capacity of 269k sq ft and 26 loading bays, accommodating 11,544 pallets and offering floor storage of 169,000 sq ft. Its launch will increase the group’s total warehouse space by 19% to 1.6m sq ft. Revenue contribution is expected to begin in March 2024. Our estimate suggests this warehouse could increase the group’s total warehouse revenue by >10% upon full utilization. The new capacity has already been incorporated into our current forecasts. The warehouse segment contributed 15% to 9M23 group revenue and 20% to EBIT.

Est. c.MYR40m pa for warehouse expansion capex

In addition to the new Westports warehouse, Swift is expanding its Penang facility following a recent acquisition, set to be completed in 1Q24. This expansion will increase warehouse capacity by 118k sq ft. The group plans to sustain warehouse segment growth, aiming to construct one warehouse annually with capex between MYR30-40m (excl. land costs), leveraging on its abundant vacant landbanks for future utilisation/monetisation.

Cautious on global macro headwinds

We anticipate Swift's 4Q23 results (scheduled for announcement on 23 Feb), to show QoQ growth, primarily driven by its expanding warehousing segment and increased volume handled due to seasonal factors. Typically, the 2H of the year exhibits stronger seasonal performance due to the year- end peak period and fewer festive holidays compared to the 1H. Looking forward, we maintain a cautious stance on the group's outlook, largely due to global macroeconomic headwinds. However, we believe the company's share price has already factored in these challenges.

Source: Maybank Research - 21 Feb 2024