DEVELOPMENT

• Swift Haulage Berhad ("Swift Haulage") has formed a joint venture ("JV") with its major shareholder, Singapore-based JWD Asia Holding Pte. Ltd. (JAH), which holds a 20.48% stake, to establish Swift Cold Chain Sdn. Bhd. ("JV Company"). The JV Company will specialise in operating and managing a cold chain warehouse and transportation business across Peninsular Malaysia.
• The JV will involve the subscription of 14.4m ordinary shares, each priced at RM1.00. Swift Haulage will hold a 51% stake in the JV, while JAH will own the remaining 49%.
• As part of the JV responsibilities, JAH will contribute by designing the warehouse layout and infrastructure, as well as providing personnel training. Meanwhile, Swift Haulage will oversee the day-to-day operations and focus on identifying potential customers for the business.

OUR VIEW

• We view the JV positively as it expands Swift Haulage's presence in the cold chain business. Currently, the Group's involvement in this business is limited to East Malaysia through its JV with Tasco Berhad, Hypercold Logistics Sdn Bhd. This company has been operating the largest cold chain hub in Kota Kinabalu Industrial Park since CY23, with a storage capacity of 6,389 pallets.
• The partnership with JAH is expected to bring valuable knowledge and expertise in cold chain logistics to the JV, leveraging the capabilities of JAH's parent company, SCGJWD Logistics Public Company Limited ("SCGJWD"). SCGJWD has extensive experience in managing a significant volume of cold chain pallets (approximately 242,000 units) and possesses specialised knowledge in operating Automated Storage and Retrieval Systems (ASRS).
• Feasibility studies are currently being conducted for a cold chain facility in Tebrau, Johor, which, if realised, will target Singapore's high-demand market by capitalising on Malaysia's cost advantages. Beyond this initial setup, the Group is also exploring expansion opportunities in the Northern region, including Penang and other areas where Swift has an established presence.
• The RM7.3m capital contribution to the JV company, reflecting its 51% shareholding, is expected to be satisfied in cash through internally generated funds and/or bank borrowings. As of the end of Sep-24, Swift held cash and balances amounting to RM44.4m. Its gearing ratio stood at 1.0x, which is in line with its internal target given its asset-heavy business model.
• There are no changes to our earnings estimates at this time, as the JV is still in its preliminary stages. We maintain our NEUTRAL call on the stock with an unchanged target price of RM0.46, as it is currently trading near the sector's 5- year historical average at 10.5x FY25F EPS.

Source: MIDF Research - 8 Jan 2025