PETALING JAYA: Integrated logistics provider Swift Haulage Bhd’s robust growth potential and upcoming expansion of warehouse space, coupled with its higher-than-industry profit margin and improving gearing levels have resulted in it being given an “outperform” call by a research house.
Kenanga Research, which initiated coverage on the company yesterday, said it was positive on the group because of these factors.
The company’s integrated operations, scale and reach “embodies the essence of Swift’s business model,” it told clients in the initiation report.
“Being integrated, Swift has presence in the logistic continuum that spans container haulage, land transport, warehousing and freight forwarding.
“It is the country’s dominant prime mover operator with the prospects of its container haulage business riding on containerised throughput imports and exports driven by Malaysia’s continued strong trade figures,” the research house said.
In the report, Kenanga also pointed out that Swift’s earnings captured steady recurring income from its petrochemical segment in which it had secured a contract in November 2018 for a period of three years, with an extension option for another two years.
This is to manage a third-party warehouse, which provides exponential future business opportunity especially during periods of rising crude oil price, it said.
The company has also further expanded its portfolio of diversified blue-chip customers that collectively contributed 33% of its 2021 revenue, said Kenanga.
It said 2022 to 2023 will likely see Swift enjoying sustainable high single-digit margins with the expanding warehousing/container depot business and further freight forwarding growth outpacing the rest.
“There will be financial cost savings from the expected utilisation of initial public offering proceeds to repay borrowing and utilisation of investment tax allowances that lowers tax rate in 2021 and 2022, with spill-over into 2023, “ Kenanga added.
Swift’s past business performance reflects superior operating efficiencies and financial metrics relative to peers thanks to sheer size, geographical reach and the integrated nature of its business model, it said.
The research house initiated coverage on Swift yesterday with an “outperform” rating and a target price of RM1.01.
Based on the stock’s last traded price of RM75 sen, the whole group is valued at some RM667mil.
Kenanga warned that lower-than-expected sales and margins and a delay in its primary warehousing expansion plans remained risks for Swift.