Swift Haulage’s land transportation is also expected to benefit from cross-selling.
PETALING JAYA: The outlook is bright for Swift Haulage Bhd
on expectations of a stronger second half of the year (2H24) for the container haulage sector despite ongoing global uncertainties.
In a report, MIDF Research said the integrated logistics provider saw its container volumes drop 11% year-on-year (y-o-y) in the second quarter of this year (2Q24) due to inefficiencies caused by port congestions as the Red Sea crisis intensified.
It noted, however, the second half is generally stronger, contributing 55% to the group’s annual volume.
“We expect margins to improve as our projection indicates that 2H24 container volumes are expected to reach 332,376 twenty-foot equivalent units, representing a 3% growth for the full year.”
The research unit said the anticipated recovery could drive a surge in freight forwarding jobs, as the company manages 30% of its container haulage business internally for its freight forwarding needs.
Swift Haulage’s land transportation is also expected to benefit from cross-selling.
MIDF Research said even though the number of trips for land transportation increased 23.1% y-o-y for 2Q24, the pre-tax profit margin fell by two basis points.
“This decline was driven by lower rates attributed to softer festive demand compared to the previous year.
“Going forward, however, we see additional potential in this segment as warehouse utilisation rates improve in the upcoming quarters, which could offer further growth through cross-selling opportunities,” the securities firm said.
Swift Haulage’s margin for warehouse and container depot segment is expected to improve as utilisation rates for its new warehouses increase.
The segment saw a substantial decline of 5.1 percentage points in 2Q24 due to high startup costs.
“Following the completion of renovations, the Tebrau warehouse will have a fast-moving consumer goods customer moving in during 4Q24, which is expected to boost its utilisation to 80% from below 50%.
“The new Perai warehouse, acquired in August, has been fully rented out.
“This, along with the newly operational Westports warehouse which is over 90% utilised, contributes to an additional 30% capacity in its own/lease and operate warehouse portfolio for this year,” the research house said.
In line with these factors, MIDF Research has kept its “buy” call on Swift Haulage with an unchanged target price of 54 sen.
It also believes the stock is undervalued as it is trading at minus 0.5 standard deviation below the sector’s historical mean.
