Swift Haulage Berhad - Downgraded after earnings consistently missed expectations
Fri, 28-Feb-2025 07:59 am
by Jayden Tan • Apex Research

Counter

SWIFT (5303)

Target Price (RM)

0.440

Recommendation

Hold

Summary

  • Swift Haulage reported FY24 core net profit of RM25.9m (-34.5% yoy), missing expectations at 84% of our RM30.8m forecast and 74% of consensus RM34.9m, due to margin compression from aggressive expansions outpacing sales growth. 4QFY24 CNP fell -54.6% yoy, excluding RM1.1m in ESOS-related expenses, despite a +6.7% yoy revenue increase, as higher expansion costs weighed on margins. CNP inched up +6% qoq on stronger container haulage and freight forwarding margins. 

  • Lowering FY25F/FY26F earnings by -34%/-26% to RM30.3m/RM42.4m, factoring in weaker margins across all divisions amid intense competition and cost pressures.

  • Downgrade to HOLD with a lower TP of RM0.44 (from RM0.58), maintaining 9x PER on FY25F EPS, as continued margin erosion and rising costs pose near-term profitability challenges.

 

Results missed expectations. FY24 core net profit of RM25.9m (-34.5% yoy) fell short of estimates, representing 84% of our RM30.8m forecast and 74% of the consensus figure of RM34.9m. This shortfall stemmed largely from margin compression across all business segments, driven by aggressive expansions that outpaced sales growth.

 

YoY. Excluding RM1.1m in ESOS-related expenses, 4QFY24 core net profit declined by 54.6% yoy to RM6.1m, despite a 6.7% increase in revenue. Costs related to expansion weighed on margins.

 

QoQ. Core net profit inched up 6% qoq, mainly supported by stronger container haulage and freight forwarding margins. Revenue rose slightly by 1.2% qoq.

 

Dividend. The Group declared a dividend of 0.8 sen/share, bringing the full-year total to 1.6 sen/share, payable on 10 Apr 2025.

 

Outlook. We are pessimistic about Swift Haulage’s near-term earnings recovery given repeated misses, intense market competition, and persistent cost pressures. Aggressive capacity expansion has notably increased operating costs, while lagging revenue growth is expected to squeeze margins further in FY25f.

 

Earnings Revision. Following the consistent underperformance, we reduce our earnings forecasts by 34% and 26% to RM30.3m and RM42.4m for FY25F and FY26F, respectively. This reflects lower margin assumptions for the container haulage, freight forwarding, warehousing, and trucking divisions.

 

Valuation. We downgrade Swift Haulage to HOLD with a lower target price of RM0.44 (previously RM0.58), based on an unchanged 9x PER applied to FY25f EPS. 

 

Risk. Further margin erosion could result from fierce price competition and elevated cost pressures, alongside rising depreciation and finance costs tied to capacity expansion.

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