Swift’s future earnings will be anchored by its expansion plan which would enable them to cross sell its services. Currently trading at alluring valuation at only 10x PE, we have a BUY with target price of RM1.09 based on 16x PE multiple (which is premium to the average 14.9x CY22F PER of its peers) to its FY22F EPS of 6.8sen. We believe a 16x PER valuation is justified given its solid earnings visibility and the ability to enhance its market share within the domestic transportation industry. Our fair value offers potential upside of around 33%.

Swift owns 1,460 prime movers in Malaysia and 86 prime movers in Thailand. The utilisation rate of prime movers in both Malaysia and Thailand ranges from 81% - 89% for the FYE2020. Hence, the acquisition of new prime movers will give Swift the capacity to grow its container haulage and land transportation business operations. Swift intends to purchase 30 new prime movers (RM400,000 per unit) which are estimated to cost RM12.0m.

Upon the completion of a new warehouse in the Port Klang Free Zone by 3QFY22, the Group will have a planned floor space of approximately 178,000 sq. ft. as compared to 54,300 sq. ft. currently. This will enhance the Group’s ability to better serve existing and potential customers as the Westport Warehouse is currently fully utilised. Meanwhile, Swift intends to construct a warehouse with storage capacity of 5,800,000 sq. ft. by 2024 to cater for future e-commerce’ logistics requirements.

In June 2021, Swift acquired 50% equity interest of Hypercold Logistics and 15% equity interest of Platinum Coldchain. Swift is planning to expand Hypercold Logistics’ cold chain capacity from 26,700 sq.ft. to 56,700 sq.ft. by 4QFY22 which enables the group to increase its scope of services to provide cold-chain logistics and expand business operations in Sabah.

In July 2021, Swift acquired a plot land at Bandar Sultan Sulaiman measuring 1,263,231 sq. ft. costing RM69.37m. The Land is currently leased to 2 external tenants with tenancy expiring on 1QFY22. After the expiry of the tenancy agreements, Swift intends to use the land to expand its existing container haulage, land transportation and/or warehousing and container depot services.

Source: Rakuten Research - 10 Feb 2022