Neutral on latest warehouse acquisition

We maintain our earnings forecasts and TP of MYR0.52 for Swift, based on 7.0x FY24E EV/EBITDA, in line with its peers' 5Y hist. mean. Yesterday, Swift announced that it is acquiring three pieces of industrial land in Penang from Transocean for MYR30.15m to expand its warehouse capacity. The acquisition is expected to be funded fully via debt. Based on our estimates, this will increase Swift’s net gearing to 1.0x from 0.96x as of 3Q23. We are neutral on this development.

Total cost for the property was MYR20m

The three land parcels totalling 21,702 sq m include a warehouse (103,150 sq ft) and a five-storey office block (31,300 sq ft). According to Transocean (TRO MK, Not Rated, CP: MYR1.72) in a separate announcement, the total associated costs for the property was MYR19.56m. Transocean anticipates a gain of MYR410k post disposal.

Updates on Swift’s warehouses in Penang

To recap, Swift presently manages a total warehouse capacity of c.1,309k sq ft in MY (c. 233k sqft in Penang). Besides the ongoing acquisition, Swift is also in the process of acquiring a 118k sq ft warehouse in Perai, Penang, set to conclude in 1Q24. Since 2Q, the utilization of its Penang warehouse has experienced some slowdown due to the loss of customers. However, it has already found replacement customers and expects the utilization rate to recover to >90% in 4Q23.

Cautious on outlook

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

Source: Maybank Research - 29 Nov 2023