Results in-line; maintain HOLD

Swift’s 1Q24 core net profit (CNP) of MYR8.1m came within ours but below consensus estimates, at 20%/17% of full-year respectively. We maintain our earnings forecasts and target price of MYR0.51 (based on 7.0x FY24E EV/EBITDA, in-line with its peers' 5Y mean). Maintain HOLD. Swift’s W&CD segment remains hampered by low utilization rates in specific warehouses, notably the PKFZ warehouse (due to intense competition) and the Tebrau warehouse (utilization: c.50%; new FMCG customer secured, to commence in late 3Q, expected to improve utilization rate to c.80%).

LT and W&CD new capacity drove revenue growth

1Q24, CNP (ex- MYR13m in positive one-offs, primarily from the sale of its JV, Global Vision Logistics’ shares) fell 11% YoY to MYR8.1m, despite a 6% revenue increase. This decline stemmed from a lower operating profit margin (attributed to higher overheads, including depreciation) and increased finance costs. Revenue growth was mainly driven by the LT (+7% YoY) and W&CD (+22% YoY) segments due to new capacity additions.

QoQ, all segments experienced decline except for LT

QoQ, CNP decreased by 39% despite a 4% revenue increase. All segments except for LT (EBIT: +22% QoQ) experienced declines in operating profits. LT’s growth was driven by improved demand for express services and car carrier. CH saw higher rev/TEU from volume recovery from certain long haul customers, despite an overall volume decline. FF margins suffered from handling fewer project cargoes with better rates/job. W&CD performance was hindered by lower warehouse utilization rates.

Cautious outlook but largely reflected in share price

We remain cautious on the group’s outlook. While we anticipate growth in its W&CD segment due to recent capacity expansion, uptake rates may be slow. The group faces pressure from macroeconomic headwinds, posing downward risks to rates and volume handled. However, we believe its depressed share price largely reflects these headwinds.

Source: Maybank Research - 14 May 2024