Cautious outlook post briefing; maintain HOLD

We maintained our earnings forecasts and TP of MYR0.49 (7.0x FY25E EV/EBITDA) for Swift Haulage (Swift), maintaining a cautious outlook post results briefing, given the challenging local land transportation environment. Maintain HOLD.

Updates on warehousing segment

In 3Q24, Swift’s warehousing capacity expanded by 6% to 1,467,344 sq ft after acquiring a fully-tenanted 118k sq ft warehouse in Penang in Aug. Overall utilization increased to 80%, but utilisation growth was slower than expected due to a delay in the start of an FMCG client’s tenancy at the Tebrau warehouse, now scheduled to begin in Oct (originally 3Q24). Meanwhile, one-third of the Tebrau warehouse’s capacity was vacated for renovations to accommodate a new client starting in Apr 2025, temporarily lowering its utilization to c.33%. Utilization at the Tebrau warehouse is projected to increase to c.66% in 4Q24 with the FMCG client’s tenancy.

Other segments update

In 9M24, CH volume was down 7% YoY, in line with lower gateway port throughput (per Association of Malaysia Hauliers). Rev/TEU rose by 12% YoY due to higher cross-border rates (mostly to SG), though at lower margins. LT trips rose 21% YoY, but rev/trip declined 11% YoY due to shorter distances. For CD, utilization eased to 78% from 87% in 9M23 as port traffic normalized.

Continues to embark on warehouse expansion

We remain cautious on Swift’s outlook. Rising operating costs (ie. higher ocean/air freight rates, higher minimum wage, etc.) are impacting Swift’s customers, leading them to apply more aggressive pressure on third-party logistic players like Swift for cost reductions. Nonetheless, Swift is advancing with its warehouse expansion in Penang, where demand is strong, budgeting MYR35m for a 200k sq ft warehouse targeted for completion by end-2025.

Source: Maybank Research - 15 Nov 2024