Reopening of economy to bode well for Swift Haulage
KUCHING: Swift Haulage Bhd (Swift) is vying for doubledigit earnings growth in both the financial year 2022 (FY22) and FY23, driven largely by the reopening of the economy.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) noted that Swift guided that for its fourth quarter of FY22 (4QFY22) earnings to be stronger sequentially thanks to bumper profits from freight forwarding segment (which typically contributes circa 50 per cent to the group profit) backed by seasonally higher project-based contracts in 4QCY22.
Also helping will be the expected double-digit growth in exports driven by the ringgit’s weakness while festivities should also buoy its other segments, it added.
It projected Swift’s 4Q22 core net profit to rise 54 per cent quarter-on-quarter (q-o-q) or 58 per cent year-on-year (y-o-y) to RM18 million.
“We like Swift for its leading position in the Malaysian haulage business commanding close to 10 per cent market share, its value-adding integrated offerings resulting in a superb pre-tax profit margin of 10 per cent compared to industry average of four per cent, and the tremendous growth potential of its warehousing business, riding on the booming domestic e-commerce market,” Kenanga Research said.
Meanwhile, it noted that Swift echoed, once again, Westports’ guidance for an overall container volume growth of 0 per cent to negative five per cent for FY22 and at 0 per cent to five per cent for FY23.
“In the event of a global recession, it holds the view that it will be brief and shallow, with a recovery expected in 2H23.
“As Swift depends more on gateway cargoes (compared with transhipment cargoes of Westports), it has stronger earnings visibility.
“We are keeping our volume growth assumptions of two and seven per cent in FY22 and FY23, respectively, at its container haulage segment,” Kenanga Research said.
It also noted that at present, the overall occupancy rate at its warehouses is at a comfortable level of 90 per cent, driven by robust demand from its major customers especially those in e-commerce, paper milling, commodities trading and petrochemical-based industries.
“It is looking at further expansion at its warehousing segment in 2HFY23 to ride on the recovery in the global economy. We are keeping our assumption of warehousing space of 1.3 million sq ft in both FY22 (48 per cent) and FY23 (zero per cent),” the research team said.
All in, Kenanga Research maintained its ‘outperform’ rating on the stock.