We obtained a first-hand impression of SWIFT’s fastest-growing segment, i.e. warehousing (including e-fulfilment services), during our visit to its warehouses and storage yard in Port Klang two days ago. Well-known local and global names and brands such as Watsons, Sime Darby, ZTE and BMW that we encountered during the visit speak for SWIFT’s strong growth prospects. We maintain our forecasts, TP of RM1.00 and OUTPERFORM call.

We visited SWIFT’s operations in Kawasan Perindustrian Bandar Sultan Sulaiman, Port Klang, comprising: (i) two small load carrier warehouses, i.e. PKA and PKB (PKB also houses SWIFT’s e-fulfilment services); (ii) an automotive warehouse and yard (fully-owned after buying out JV partner German logistics giant BLG recently); and (iii) a trucking command centre (see Page 2).

Warehousing is SWIFT’s key growth area. In FY22, warehousing contributed to 13% of group turnover, up from 11% three years ago. At present, the overall occupancy rate at its warehouses is a strong 90%, driven by robust demand from its major customers, especially those operating in the space of e-commerce, paper milling, commodity trading and petrochemical products.

Banking on e-commerce growth. SWIFT guided that the demand for e-fulfilment services is still robust post-pandemic, managing over 1,000 units/day at 80% of utilisation capacity compared to over 100% utilisation during the pandemic.

Underscoring the importance of e-commerce for businesses, the eConomy SEA 2022 report by Google, Temasek and Bain & Company said approximately 43% of merchants in Malaysia believed that they could not have survived Covid-19 without digital platforms. Retailers saw a surge in their online channels with many taking measures to improve their digital infrastructure, and embracing new mediums and platforms as consumers switched to online purchases, mainly out of necessity. During that period which lasted over two years, most retailers revamped their operations and boosted their digital channels to tap into the growing online customer base.

Post-pandemic, despite shoppers returning to physical stores, ecommerce remains popular, with the Malaysian digital economy expected to continue growing at double digits, hitting USD35b in gross merchandise value (GMV) in 2025.

Riding on strong demand for passenger vehicles. SWIFT manages to garners a slice of action in the resilient local passenger vehicle market via its BLG Swift automotive warehouse and storage yard. The facility also provides pre-delivery inspection services. SWIFT said the utilisation of the facility has already returned to pre-pandemic levels. In 2019, the monthly average for vehicles storage units was 2,000 units, 2020 at 100 units, 2021 at 50 units, 2022 at 300 units and currently, month-to-date March 2023, it is already reaching 700 units. The completely knocked-down (CKD) units mostly originated from Inokom Corporation vehicle production factory in Kulim, Kedah, while imported completely built-up (CBU) units come through Westports. Various government incentives in promoting the use of battery electric vehicles (BEV) have boosted the demand for CBU units, especially EVs from BYD which has a target of 3,000 units a year. This in turn sustains the volume for SWIFT’s storage and pre-delivery inspection services.

Source: Kenanga Research - 22 Mar 2023