MIDF Research maintained its earnings estimates.
PETALING JAYA: Swift Haulage Bhd
’s encouraging quarterly results may have excited some investor, but analysts have a different view.
The company more than doubled its net profit to RM28.39mil for the third quarter ended Sept 30, 2023 (3Q23), with its share price touching a 14-month high of 61.5 sen yesterday morning.
Analysts, however, were mixed on the prospects of the integrated logistics company, which attributed its much improved net profit to higher other income earned through gains from its purchase of a 17.5% stake in Global Vision Logistics Sdn Bhd.
According to Maybank Investment Bank (Maybank IB) Research, Swift Haulage’s nine-month (9M23) core net profit (CNP) of RM18.3mil fell short at only 54% of its financial year forecasts.
“The key variance came from overhead costs from recent business expansion and employee share option scheme (Esos).
“The fourth quarter (4Q) is always seasonally stronger, coupled with the normalisation of overhead costs post-business streamlining.
“We maintain our target price (TP) of 52 sen based on seven times financial year 2024 (FY24) enterprise value to earnings before interest, taxes and amortisation (EV/Ebitda), in line with its peers’ five-year historical mean,” Maybank IB Research said.
The research house highlighted Swift Haulage’s 9M23 CNP slumped by 49% year-on-year (y-o-y) to RM18.3mil after adjusting for RM29.9mil on a one-off item, which included a gain on a purchase of RM25.5mil.
The CNP decline, despite a 4% y-o-y growth in revenue, was mainly due to higher Esos costs, overheads, depreciation and finance costs.
The revenue growth was driven by the company’s land transportation (up 14% y-o-y) and warehousing and container depot (up 22% y-o-y) segments due to new capacity additions, partially offset by weaker performance in container haulage (down 5% y-o-y) and freight forwarding revenue (down 13% y-o-y).
“We are cautious on Swift Haulage’s outlook following five consecutive quarters of earnings misses. Although we anticipate growth in its warehousing and container depot segments due to recent capacity expansions, the uptake rate may be slow.
“The container haulage and freight forwarding segments are being negatively impacted by macroeconomic headwinds, posing downward risk to the rates and volume handled.
“Having said that, we believe its depressed share price has largely reflected the headwinds.” Maybank IB Research said.
It has maintained its “hold” call and target price of 52 sen based on seven times FY24 EV/Ebitda, in line with its peers’ five-year historical mean.
Meanwhile, MIDF Research was more bullish on the counter.
It expects Malaysia’s external trade to stabilise and regain momentum in 4Q this year.
MIDF Research said exports and imports are expected to return to growth mainly on the back of better recovery in China and positive sentiment over stabilising monetary policy in major economies.
“This should benefit logistics players, including Swift Haulage, given its strong position in the container haulage market and its expanded fleet, enabling the company to capitalise on cross-selling opportunities within the land transportation business.
“The new warehouses (in Tebrau, Johor and Klang, Selangor) could see increased occupancy rates, potentially leading to improvements in profit margins,” it added.
The research house maintained its earnings estimates but expected to revise them downward after gaining more clarity from the management during an analyst briefing.
It maintained its “buy” call with an unchanged TP of 65 sen.
