Swift Haulage Berhad (Swift) reported a core PATAMI of RM8.3m for 2QFY24, resulting in a total core PATAMI of RM15.9m for 1HFY24, which fell short of MIDF Research (MIDF) estimates at 39% due to lower-than-expected profit margins.

No adjustments were made to their earnings estimate as we await further guidance from management following the briefing.

The stock is trading at 10.2x FY25F EPS, which is -0.5 SD below the sector's 5-year historical mean. Given the recent drop in the share price, they believe that it presents a trading opportunity for investors given the current price does not reflect its fundamentals.

Hence, they are upgrading their call from NEUTRAL to BUY. Their target price remains unchanged at RM0.54.

Potential upside catalysts for their projections include higher than-expected gateway container throughput and further improvements in margins from economies of scale.

According to MIDF in a note today (Aug 12), a first interim single-tier dividend of 0.8 cents has been declared, reflecting a dividend payout of 44%.

In 2QFY24, MIDF noted that revenue increased by +4.7%yoy, primarily driven by the expansion of warehouse facilities and growth in depot operations.

Revenue in this segment grew by double digits, with an increase of +11.7%yoy. The boost in activity at these facilities also positively impacted the container haulage (+4.0%yoy) and land transportation (+4.9%yoy) businesses.

Overall core PATAMI saw a growth of +9.7%yoy. Sequentially, revenue fell by -3.6%qoq, with declines across all segments except for warehousing and container depot operations (+2.8%qoq).

This drop was likely due to the slower quarter caused by the festive period. However, core PATAMI rose by +8.9%qoq due to margin improvements resulting from economies of scale in the new warehouses.

With the anticipated trade recoveryMIDF said that they expected a gradual increase in container and freight forwarding volumes throughout FY24.

The second half of the year is typically stronger for the container haulage business as it approaches the peak season.

Furthermore, given the port congestion issue, demand for warehouse storage could remain high. The Group anticipated adding a total of +387,000 sq ft of new capacity this year.

MIDF anticipated margin improvement as the overall warehouse utilisation rate is expected to rise to 80% this year, up from 74% in FY23.

While Maybank Investment Bank said Swift's 1H24 core net profit (CNP) of MYR15.7m met their expectation but fell short of consensus, representing 39%/36% of full-year estimates, respectively.

They maintained their earnings forecasts and TP of MYR0.51, based on 7.0x FY24E EV/EBITDA, in line with the 5Y peer average. They maintained their calling to HOLD.

They expected a stronger 2H24, driven by seasonal factors and increased contributions from the recently acquired 118k sq ft Penang warehouse (acquisition completed in Aug 2024) and Tebrau warehouse, where utilisation is expected to rise to c.80% from the current c.50% with a new FMCG customer commencing operations in late 3Q24.

Lower EBIT and finance costs dragged 1H24 earnings 1H24 CNP (ex-MYR14m in one-off gain from the sale of Global Vision Logistics' shares) declined 3% YoY to MYR15.7m despite a 7% revenue increase.

The weaker YoY CNP Maybank noted was mainly due to lower operating profit across all segments except W&CD, along with higher finance costs. Revenue growth was mainly driven by the LT (+9% YoY) and W&CD (+17% YoY) operations, boosted by new capacity.

QoQ, all segments declined except W&CD QoQ, 2Q24 CNP fell 7% due to a 4% decline in revenue.

Maybank said the operating profits declined across all segments except W&CD, which saw a 4% QoQ increase in EBIT, likely driven by improved utilisation rates in 2Q24.
They remained cautious on the group's outlook. While they anticipated growth in its W&CD segment due to recent capacity expansion, uptake rates may be slow.

The group faces pressure from steep competition, posing downward risks to rates and volume handled. However, they believed its depressed share price largely reflects these headwinds.