Swift Haulage is looking to acquire the remaining ownership in its associated company, BLG Swift Logistics (BLG Swift), from BLG Industrielogistik GmbH & Co. KG. Swift Haulage, via its wholly owned Swift Integrated Logistics Sdn Bhd (SILSB, currently has a 60% ownership in BLG Swift.
The purchase consideration of RM2.7m will be satisfied via internally generated funds whereby the deal is to be completed within 4 months.
BLG Swift and its 100%-owned subsidiary, Swift Mega Carriers (SMCSB), are mainly involved in the provision of warehousing services and car carrier transportation services. BLG Swift leases the 274,318 sq ft-vehicle distribution centre at SLC Warehouse in Port Klang and an open yard from Swift Haulage for the storage of passenger cars. The size of the open yard rented depends on its requirements.
Valuation. The share of loss in FY21 was attributed to the pandemic which has led to lower demand for warehousing and transportation services to its automotive industry customers whereby the total industry volume (TIV) has fallen by -3.7% YoY.
BLG Swift has likely turned to profitability in FY22E on the back of +42.0% YoY growth in TIV. As there is an absence in profits for FY21, the deal is valued at 8.4x based on its FY20 PAT. A relatively recent deal involving an acquisition of a 50% stake in Hypercold Logistics (HLSB) in FY21, was valued at 16.3x. HLSB provides cold-chain logistics services in East Malaysia.
Impact. Swift Haulage should have sufficient funds to take on the deal. As at end-3QFY22, Swift Haulage’s cash balance stood at RM21.0m, while its gearing ratio is at 0.8x. The proposed acquisition is not expected to materially impact the earnings.
Overall, the research house has rated the company with a BUY rating based on factors such as, being a leading player in the container haulage business (market share of c.9% in terms of TEUs); it fetches superior PBT margins of c.11% largely attributed to its in-house assets and cost advantages from its in-house supporting services (the industry’s PBT margins are within c.4%-5%); it shows earnings resiliency due to its exposure to Malaysia’s imports and exports; and its performance is largely insulated from the volatility of freight rates.
MIDF has maintained its BUY call on Swift Haulage with an unchanged target price (TP) of RM1.05, derived by pegging its FY23F EPS to PE of 15x. The Group is currently trading at forward PE of 7.4x, representing a-50% discount to the sector historical mean.
