PETALING JAYA: MIDF Research has reiterated its bullish stance on Swift Haulage Bhd, following the latter’s recent move to take full ownership of its 40%-owned BLG Swift Logistics Sdn Bhd.
Swift Haulage, which is an integrated logistics service provider, should have sufficient funds to acquire the remaining 60% stake worth RM2.7mil in BLG Swift, according to MIDF Research.
BLG Swift is mainly involved in the provision of warehousing services and car carrier transportation services.
“As at end-September 2022, Swift Haulage’s cash balance stood at RM21mil, while its gearing ratio is at 0.8 times.
“The proposed acquisition is not expected to materially impact the earnings,” said the research house.
On Jan 30, Swift Haulage announced that its wholly-owned subsidiary, Swift Integrated Logistics Sdn Bhd, has entered into an agreement to acquire the remaining 60% stake in BLG Swift from BLG Industrielogistik GmbH & Co KG.
The deal will be satisfied via internally generated funds and is expected to be completed within four months.
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.
MIDF Research said the share of loss from BLG Swift in the financial year of 2021 (FY21) was attributed to the Covid-19 pandemic.
This 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% year-on-year (y-o-y).
“BLG Swift has likely returned to profitability in FY22 on the back of 42% y-o-y growth in TIV.
“As there is an absence in profits for FY21, the deal is valued at 8.4 times based on its FY20 profit after tax.
“A relatively recent deal involving an acquisition of a 50% stake in Hypercold Logistics Sdn Bhd (HLSB) in FY21 was valued at 16.3 times.”
HLSB provides cold-chain logistics services in Sabah and Sarawak, said MIDF Research.
Looking forward, the research house said it continues to favour Swift Haulage as it is a leading player in the container haulage business, with a market share of about 9% in terms of 20-ft equivalent unit or cargo capacity.
The company also fetches superior pre-tax profit margins of about 11% and it shows earnings resiliency due to its exposure to Malaysia’s imports and exports.
In addition, its performance is largely insulated from the volatility of freight rates, said MIDF Research.
“We maintain our ‘buy’ call on Swift Haulage with an unchanged target price of RM1.05, derived by pegging its FY23 earnings per share to price-to-earnings of 15 times,” it added.