Red Sea conflict weighs on Swift Haulage’s growth
KUCHING: Kenanga Investment Bank Bhd’s research team (Kenanga Research) saw Swift Haulage Bhd’s (Swift Haulage) revenue growing by four per cent in financial year 2023 (FY23).
This was driven by land transportation (with the increased transportation activities for petrochemical products, particularly for the Petronas group of companies) and warehousing and container depot (with the increased capacity utilisation by new customers).
These, it said, more than offset the weaker container haulage and freight forwarding from the lower gateway volume toward the year-end particularly from Johor port.
“However, its core net profit declined by 11 per cent due to higher operating expenses and finance costs to support its warehouse expansion and green fleet initiatives,” Kenanga Research said.
“This was namely the addition of two units of fully-electric prime movers, and the full upgrade of its ICE prime mover fleet to the state-of-the-art fuelefficient Euro 5 model from the Euro 3 model, expected to be completed by April 2024.
On a quarterly basis, its 4QFY23 revenue rose three per cent driven by higher demand for its land transportation and warehousing and container depot, which more than offset the weaker contribution from its container haulage and freight forwarding.
Swift Haulage’s core net profit rose by a steeper 24 per cent largely due to the utilisation of the investment tax allowance (ITA).
“Swift Haulage echoed Westports’ guidance for a low single-digit container volume growth rate in FY24 as it believes the Red Sea conflict, if prolonged, will weigh on the Europe-Asian trade.
“Nonetheless, it is slightly more positive on FY25, guiding for a single-digit container volume growth rate. SWIFT depends more on gateway cargoes which have since weakened to a singledigit growth (vs. double-digit in 1HCY23).
“Thus, we lower our volume growth assumption to two per cent in FY24 for its container haulage segment and introduce the same assumption for FY25.”
Meanwhile, MIDF Amanah Investment Bank Bhd (MIDF Research) believed that Swift Haulage’s customers’ adoption of a “just-in-case” inventory storage model continues to drive warehouse capacity expansion, with the group anticipating a total of 387,000 square feet of additional capacity this year.
This expansion offers avenues to cross-sell its transportation services.
“The newly launched Westport Warehouse is set to begin operations in March 2024, with major customer Sharp Electronics Malaysia expected to occupy 70 per cent of the space.
“With the anticipation of trade recovery, we expect a gradual volume uptick in container and freight forwarding throughout CY24. Management projects single-digit growth for these segments.”