Swift’s earnings to increase with warehouse expansion

The company has warehouses in Port Klang, Penang and Johor, but plans to extend its operations to Tebrau and Seberang Perai 

By AZALEA AZUAR / Pic Source Swift Group

SWIFT Haulage Bhd closed seven sen lower at 96 sen on its maiden trading day on the Main Market of Bursa Malaysia Securities yesterday against its offer price of RM1.03 a share. 

Swift shares hit a high of RM1.13 in intraday trade before profit-taking, saw it close in the red. 

The integrated logistics service provider raised RM161.9 million from its IPO that attracted cornerstone investors such as AIA Bhd, AmFunds Management Bhd, AmIslamic Funds Management Sdn Bhd, Areca Capital Sdn Bhd, Kenanga Investors Bhd, HSBC Global Asset Management (Hong Kong) Ltd, Nikko Asset Management Asia Ltd, UOB Asset Management (M) Bhd and Zurich Life Insurance Malaysia Bhd. 

Swift plans of expanding its warehouse capacity and the size of its fleet, both of which are expected to give a boost to its earnings until its financial year 2023 (FY23) with a compound annual growth rate (CAGR) of 3.8%. 

A MIDF Research on the company noted that Swift has warehouses in Port Klang, Penang and Johor but plans to extend its operations to Tebrau and Seberang Perai. 

“In addition, the group intends to construct an ambient temperature warehouse of about 178,000 sq ft on a 300,564 sq ft (27,923 sq m) leasehold land in Port Klang Free Zone (PKFZ). 

“The PKFZ warehouse is expected to begin its operations by the third quarter of 2022 (3Q22),” MIDF stated in its report on Swift yesterday. 

Swift’s existing warehouse operations would later be relocated to the new warehouse upon completion. 

MIDF also expects the group’s net profit to increase at a 10.9% three-year CAGR during the same period which is supported by an annual growth between 5% to 20% in terms 

of twenty-foot equivalent unit transported, total jobs and land trips and utilisation rates of its warehouses and container depots. 

Swift’s earnings would be further supported by the Investment Tax Allowance granted by the Malaysian Investment Development Authority. 

“In terms of its dividend policy, the group aims for a dividend payout ratio of 30% on its PATAMI moving forward. 

“Based on our earnings forecast of RM48.3m for FY21 and the issue price of RM1.03, this translates into a dividend yield of 1.6%,” it said. 

For its fiscal year-end December performance, Swift posted a net profit of RM29.5 million on the back of RM430.9 million in revenue. 

The company’s container haulage segment has contributed 47.2% of total revenue which is the biggest contributor while the land transport segment contributed 29.7% of revenue, and the warehousing and container depot segment generated 12.9% of revenue and the freight forwarding jobs segment contributed 10.1% of revenue. 

Its profit before tax stood at RM47.8 million while the cash balance of RM25.5 million with a net gearing of 1.5x. 

“Upon listing, the cash balance is expected to increase to an estimated RM187.3m, which will bring the group’s net gearing down to <1.0x,” MIDF forecast. 

MIDF favours Swift due to its sizeable assets, which enables an extensive coverage with healthy margins, strong record and cross-selling opportunities and dealer’s advantages. 

Apart from expanding its warehouse capacity, the group also aims to purchase a piece of land in Bandar Sultan Sulaiman for RM59.4 million of which 70% of the total cost or RM41.6m will be funded via the IPO proceeds. The acquisition is to be finalised by 4Q21. 

Swift also aims to purchase 30 more prime movers worth a total of RM12 million. 

“We value the group at RM1.28 per share by pegging its FY22 EPS of 6.98 sen to our target PER of 18.3x. This is based on the historical three-year mean PER of its peers,” MIDF stated.