Swift Haulage A Proxy To Supply Chain Logistics Investment

Maybank Investment has initiated a buy call on Swift Haulage with a target price of MYR0.65 as the group is seen positively on its near-term growth underpinned by its recent capacity expansion, ie. the addition of 30 new prime movers, ongoing warehouse expansion, and a new venture into cold chain logistics.

Over the longer term, Swift Haulage says it will focus on its strengths to grow its business via M&A activities, wallet share increase, and capitalising on its strategic vacant land banks to generate returns. A market leader in integrated logistics services the group is a leading integrated logistics service provider, operating in segments such as container haulage, land transportation, warehousing & container depot, and freight forwarding. Its strengths lie in its ability to create value through successful M&As, a vast network of coverage, significant market share, and high operational efficiencies (as reflected in
its superior margins vs. industry peers). The group has established a strong relationship with its blue-chip clientele, which offer a stable and resilient revenue stream, and opportunities for wallet share increase.

Proxy to supply chain logistics investment
The demand for supply chain logistics has increased significantly, partly driven by the rise of e-commerce, coupled with the trend towards supply chain integration by global businesses to establish a resilient and reliable fulfillment system. This has been accelerated by the pandemic, and Swift Haulage is well-positioned in the market (with its asset-owning business
model) to ride on the tailwinds in order to capture growth in the longer term.

Forecasting FY21-24E core net profit CAGR of 11%
Maybank Investment is projecting Swift Haulage’s core net profit (CNP) to grow by a 3-year FY21-24E CAGR of 11%, underpinned by its recent capacity expansion and recovery from a low base due to pandemic-induced disruptions. These will also contribute to margin improvement, thanks to improved operational efficiencies and better economies of scale. At the current price, the stock is trading at a forward PER of 7.5x, a significant discount to the industry’s median historical PER of 14.3x. While the group does not have a dividend policy, it strives to maintain a payout of 30% of its net profit and maintaining its net gearing level at 0.8x-1.0x.

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