Swift Haulage - Disposing 12.5% Stake in GVL

Price Target: 
Price Call: 
Last Price: 
-0.03 (5.45%)

One-off gain from GVL disposal

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. Swift has announced that it is disposing its 12.5% stake in 42.5%- associate, Global Vision Logistics S/B (GVL), for MYR44.3m. Post disposal, Swift’s holding in GVL will reduce to 30%. The sale will result in a one-off gain of MYR11m (1.3sen/shr) for Swift. Maintain HOLD.

Net gearing to improve to 0.89x post-disposal

According to Swift, gain from the disposal of MYR11m will be reflected in 1Q24. The proceeds will be utilized for working capital and repayment of borrowings. Our back-of-the-envelope calculation shows that the net proceeds of MYR43.0m (excluding MYR1.3m for payment of real property gains tax) will reduce its net gearing to 0.89x from 0.96x as of end-3Q23. Swift is selling the 12.5% stake to IJM RE S/B.

Slight discount to GVL’s NTA

According to Swift, the disposal price represents a slight discount to GVL’s NTA (no details on the amount) due to a minority stake that is being sold. GVL is now constructing the Shah Alam International Logistics Hub with IJM (IJM MK, BUY, CP MYR2.19, TP MYR2.20) as the contractor for phase one. GVL’s earnings contribution is expected to commence in 1H24, upon the completion of Phase 1 construction, involving 2.8m sq ft. Swift plans to lease 500k sq ft of warehouse space from GVL to be subleased to its clients, and anticipates a revenue of MYR1.2m/mth (excluding additional handling services). We have yet to incorporate the contribution from GVL into our forecasts.

Cautious on outlook

We remain cautious on Swift's outlook. Although we anticipate growth in its W&CD segment due to recent capacity expansion, the uptake rate may be slow. The CH and FF segments are being negatively impacted by macro- economic headwinds, posing downward risks to rates and volume handled. However, we believe its share price has largely reflected the headwinds.

Source: Maybank Research - 16 Jan 2024

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500K SQFT with estimated RM1.2mil/month revenue. Shah Alam warehouse rental per sqft is RM2.00+/-, so with the given input, Swift is renting it out at RM2.40/sqft, but by arm's length rental from its associate company, it would be somewhere in the ballpark of RM2.00/sqft, meaning Swift is only making about RM0.40/sqft, times that by 500k sqft, Swift is making RM200,000/month from subletting.

2024-01-16 11:19

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