Maintaining forecasts, TP and HOLD call

We maintain our earnings forecasts, MYR0.51 TP (based on 7.0x FY24E EV/EBITDA - 5Y peer avg), and HOLD call post Swift’s results briefing. The bright spot in FY24E is its warehousing segment. Swift completed the acquisition of a 118k sq ft Penang warehouse in Aug 2024, boosting W&CD capacity by 8%; this is expected to positively impact 2H24 earnings. The fully tenanted warehouse is also set to benefit Swift’s LT segment. Additionally, its Tebrau warehouse utilisation is expected to rise to c.80% from c.50% with a new FMCG customer starting operations in late 3Q24.

Growth mainly from Westports and PKFZ warehouses

In 2Q24, Swift’s total warehouse capacity grew by c.80k sq ft to 1,388,788 sq ft, with utilisation edging up to 78% (1Q24: 76%). This was mainly driven by its Westports warehouse 1, which began operations in Apr and reached 90% utilisation rate by May. Notably, its PKFZ warehouse utilisation also improved significantly to >80%, from c.30% in 1Q24. These new capacity and higher utilisation have contributed to a 3% YoY increase in W&CD revenue in 2Q24.

Demand for other segments were rather muted

In 1H24, CH volume declined by c.10% YoY, in line with lower local gateway port throughput, despite a 14% YoY rate increase from longer-distance clients. CD utilisation rates remained stable. Likewise, LT rates fell by c.11% in 1H24 due to muted festive demand this year.

Cautious outlook but anticipating better 2H

The group anticipates a stronger 2H24, driven by seasonal factors and increased contribution from the W&CD segment. However, we remain cautious on its outlook. The group faces pressure from steep competition, which could impact rates and volumes. Additionally, supply chain disruptions, including port congestion and soaring freight rates, have hindered performance, causing some exporters to defer shipments.

Source: Maybank Research - 13 Aug 2024