Kenanga Investment Bank Bhd and MIDF Research have reiterated their ‘outperform’ and ‘buy’ calls on the stock respectively, on the back of strong demand for its warehousing services.
Kenanga has maintained a target price of RM1, whilst MIDF trimmed theirs slightly to 90 sen from RM1.05.
Swift is a transportation and logistics company operating e-fulfillment services, automotive warehousing and a trucking arm with more than 1,500 prime movers. It commands a leading 10% share in the haulage market.
Watsons is one of the group’s major customers for their e-fulfillment services, which comprises warehousing and consolidation for pick-up by last mile delivery service providers like GDEX.
Demand for e-fulfilment services is still robust post-pandemic, with Swift managing over 1,000 units per day at 80% of utilisation capacity compared to over 100% utilisation during the pandemic.
“In FY2022, warehousing contributed 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,” said Kenanga.
The main customers for their automotive warehouse and storage yard are Sime Darby, Auto Bavaria and BMW Malaysia which distribute BMW, MINI, BYD, Hyundai, Land Rover and Porsche vehicles.
Kenanga likes Swift for its “value-adding integrated offerings”, resulting in a superior pre-tax profit margin of 10% compared to the industry average of 4%.
Swift posted a net profit of RM50.5 million for the financial year ended Dec 31, 2022, up from RM47.1 million in FY2021.
“Swift is one of our top picks for the sector due to the scale that it can achieve thanks to its large in-house assets, which puts it in an advantageous position in the eyes of large multinational companies,” said MIDF.
Key risks to the calls include a sustained high fuel cost, delays in its primary warehousing expansion plan, and weaker than expected gateway port throughput.
Growth momentum
At the end of last year, Swift expanded its capacity by 42% in the number of warehouses owned and operated.
The group’s trucking segment is expected to benefit from a higher number of trips from its Pengerang Integrated Petroleum Complex (PIPC) warehouse, and its newly acquired Watt Wah Petroleum Haulage in Singapore.
An additional 50 prime movers were acquired in FY2022. Swift is also due to receive two of its first electric prime movers from Volvo Malaysia in June, with a target of having it on the road by October.
Based on the current diesel price of RM2.15/litre, the management targets fuel savings of about RM2,000/month for each truck.
Growth has not yet tapered for Swift, with plans to extend their Mak Mandin Warehouse in Penang and Westport Warehouse in Klang, targeted to commence in the first quarter of FY2024. The additional warehouses would see capacity rise by another 30.7%.
The group expects its extended Westport on Dock Depot, increasing capacity by 4,000 twenty-foot equivalent unit containers, to begin operating in Q2 FY2023 to service growing demand for container depot facilities.
Swift turnaround
The haulage group has grown significantly since its inception in 2012, initially the haulage arm of Yinson Holdings Bhd.
Yinson is an energy infrastructure and technology company which designs, constructs, and operates production assets for the offshore oil and gas industry.
“Swift started when the shareholders (Persada Bina Sdn Bhd) took over Yinson Haulage from Yinson Holdings back in 2011 and we started fresh in container haulage transportation,” said CEO Loo Yong Hui in a previous interview.
The loss-making Yinson Haulage was sold to the current major shareholder Persada Bina in 2011 for just RM1.
The group was renamed Swift in 2012, and refreshed with new owners in place. The company with negative equity saw its fortunes reversed, making a profit in the first year under the new management.
Swift’s share price was up 1.08% at 47 sen, giving it a market capitalisation of RM413.76 million.