Swift Haulage’s 2H to improve on expansion in warehousing
15 May 2024
Despite a weak first quarter (1Q24) performance, analysts remain largely positive on Swift Haulage Bhd on the hope the logistics service provider’s businesses will pick up in the second half of the year (2H24) and drive earnings.
MIDF Research stated while Swift’s 1Q24 core earnings of RM7.7mil was at 19% of its estimates, it foresees Swift’s margins rising in 2H24, driven by an anticipated increase in the company’s warehouse utilisation rates.
“The newly operational Westport 269,000sq ft warehouse, since April, has been occupied, with Sharp Electronics Malaysia utilising 70% of the space and a new fast moving consumer goods (FMCG) customer is expected to occupy the remaining space this month.
“The Tebrau warehouse, currently at around 50% utilisation, is anticipating a new FMCG customer to occupy the remaining space by the end of 3Q24 at the earliest.
“Following this, we anticipate margin improvement as the overall warehouse utilisation rate is expected to increase to 80% this year, compared with 74% in 2023,” the research house said.
With these developments in mind, MIDF Research has kept its “neutral” call on Swift without making any changes to its earnings estimates for the logistics group. It however raised its target price for Swift to 54 sen a share from 50 sen, due to the rolling over of its base year to financial year 2025.
According to Maybank Investment Bank Research (Maybank IB Research), while Swift enjoyed a 6% rise in revenue in 1Q24, its core net profit fell 11% year-on-year (y-o-y) due to a lower operating profit margin (attributed to higher overheads, including depreciation) and increased finance costs.
Revenue growth for the period was mainly driven by its land-transport business (up 7% y-o-y) and warehousing and container depot (22% y-o-y) segments due to new capacity additions.
The land-transport segment’s growth was driven by improved demand for express services and car carriers. Swift’s container haulage division saw higher revenue per twenty-foot equivalent units or TEUs from volume recovery among certain long-haul customers, despite an overall volume decline.
Its freight forwarding margins suffered from handling fewer project cargoes even with better rates per job.
It has a “hold” call on Swift with a target price of 51 sen, based on seven times FY24 enterprise value to its earnings before interest, taxes, depreciation and amortisation and in line with its peers’ five-year mean.
Source: The Star
