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Swift Haulage undeterred by flood of new warehousing capacity, sees more upside

Swift Haulage undeterred by flood of new warehousing capacity, sees more upside

05 Mar 2024

SWIFT Haulage Bhd, the country’s largest container haulier by number of prime movers, is undeterred by the massive new warehousing capacity coming into the market. The group plans to add one million sq ft to the 1.6 million sq ft of warehousing space it currently owns and leases, by 2025.

It expects its future revenue growth to be majorly driven by its warehousing and container depot segment, while its container haulage and forwarding services segments should hold steady.

Container haulage and land transport services currently make up 75% of Swift’s total revenue; warehousing and container depot services contribute 15%; and the remaining 10% comes from its freight forwarding services.

Swift executive director and group CEO Loo Yong Hui expects the warehousing segment to account for at least a quarter of the group’s revenue when its warehousing capacity is bumped up over the next three to five years.

“We still have a lot of vacant land throughout Malaysia, including Penang, Johor and Kota Kinabalu,” he tells The Edge in an interview.

The warehousing industry experienced an unprecedented peak during the Covid-19 pandemic, as rising e-commerce sent retailers and general merchandisers scrambling for warehouse space to hold their inventory and supply-chain issues delayed shipments. Logistics companies such as Swift have responded by accelerating their investments in warehouses.

In the wake of the pandemic, Swift has seen the price of warehouse space surge about 30%, and those prices remain elevated despite new capacity concerns, according to Loo, who expects warehouse rates to climb further amid rising interest rates.

He points out that rates increase about 10% every three years — the period that warehouse operators and their customers typically sign leases for.

Even as more new warehousing capacity comes onstream in the country, Loo is confident that Swift can benefit from the geographic location of its warehouses, its state-of-the-art infrastructure, and the range of logistics services that gives it a competitive advantage over other smaller logistics companies.

“Location is key; no two warehouses are the same. [For example,] Shah Alam can cover areas up to Puncak Alam, but asking rates for warehouses in Puncak Alam are lower. The type of warehouse is also important [to attract tenants]. All our new warehouses boast high ceilings so that tenants can store more,” he says.

The group’s warehouse facilities are located in Tebrau, Johor; Mak Mandin and Seberang Perai in Penang; and Pulau Indah and Port Klang Free Zone in Selangor.

Swift is also in the process of constructing the six million sq ft Shah Alam International Logistics Hub (SAILH) on a 71-acre tract in Shah Alam through its 30%-owned associate company Global Vision Logistics Sdn Bhd (GVL). The first phase of the development will cost RM700 million and entail 2.8 million sq ft of warehouse space to be completed by end-2025. It has a ready customer in Watsons, which will occupy up to 400,000 sq ft.

IJM Corp Bhd, which owns a 25% stake in GVL, is the contractor for Phase 1. Hartamas Mentari Sdn Bhd owns a 30.9% stake in GVL; Ideal Force Sdn Bhd and GBA Holdings Sdn Bhd own a stake of 10% and 4.1% respectively.

“We believe our locations are prime. If the opportunity arises, we will still look to acquire more land [to build warehouses],” Loo says.

Citing the example of a 103,150 sq ft warehouse with a five-storey office block in Seberang Perai that Swift is acquiring from Transocean Holdings Bhd for RM30.2 million, he says: “The property is situated across from our northern region office operation. So, it made sense [to buy it].”

Following its takeover of rival MISC Inte­grated Logistics Sdn Bhd in 2016 and then Tanjong Express (M) Sdn Bhd in 2018, Swift has land banks across the country and is looking to monetise some of the land.

According to Loo, the holding costs of its non-revenue-generating land amount to RM15 million to RM18 million a year after taking interest and depreciation into consideration.

He says the group typically establishes one local warehousing centre each year. On average, constructing a 200,000 sq ft warehouse can cost RM30 million to RM40 million, excluding land cost, he adds.

Last week, Swift opened its newest warehouse, with a storage capacity of 269,000 sq ft, in Westports, which will be occupied by Sharp Electronics (Malaysia) Sdn Bhd. “The new facility is using only less than 10 acres of the 58-acre land. We also have a 50-acre [tract] and a 29-acre [tract] in Northport, 70 acres in Penang and 28 acres in Muar, Johor, [for future expansion]. Because the construction of warehouse assets is capital-intensive, we will do it in phases. And if we want to ramp up [our expansion] faster, we may look at the possibility of entering into a joint venture like what we did with GVL on our existing or new land,” Loo says.

Synergy with Thai-listed SJWD

Earlier this month, Thai-listed SCGJWD Logistics PCL (SJWD) emerged as a new substantial shareholder of Swift, with a 20.44% stake. SJWD is the largest integrated logistics and supply chain services provider in Thailand.

“In the logistics industry, we need to go beyond just being country-specific. We want to have a regional presence because most of our customers are either exporting regionally or intra-Asia, or they have operations regionally,” Loo explains.

“We have been looking for a strategic investor for some time. SJWD was interested. SJWD itself is a merger of two Thai companies — SCG Logistics Management Co Ltd and JWD InfoLogistics PCL — into the largest logistics company in Thailand, and its aspiration is to become the largest integrated logistics and supply chain provider in Asean. SJWD has established its presence in Thailand, Myanmar, Laos, Vietnam, Cambodia, Indonesia, the Philippines and China except for Malaysia and Singapore. So, for them, [Swift is] the gateway to Malaysia and Singapore.”

He adds that Swift now has partners throughout Asean and is involved mainly in surface logistics such as transport services. “But with SJWD, we can now sell door-to-door services overseas.”

The deal with SJWD saw the holding of Swift’s single-largest shareholder Persada Bina Sdn Bhd reduced to 23.995%, from 35.155%. Companies Commission of Malaysia data shows Loo holds a 49% stake in Persada Bina, while Swift non-executive director Datuk Md Yusoff @ Mohd Yusoff Jaafar owns the rest.

“Our strategy is Persada Bina will still be the majority shareholder [of Swift]. They [SJWD] have a similar concept, where they do not necessarily have to own 100% of all their investments overseas,” says Loo.

Swift also plans to venture into the cold chain logistics sector by leveraging SJWD’s expertise in cold chain transport. “We can also form a new company to establish the cold chain logistics business here,” he says, adding that Thailand’s cold chain logistics industry is at least four times bigger than Malaysia’s.

He notes that demand for third-party companies to manage cold chain logistics in Malaysia is still low, as most food and beve­rage providers have their own cold chain facility.

Last Friday, Swift announced its financial results for the year ended Dec 31, 2023 (FY2023), which saw a 32.5% increase in net profit to RM64.23 million, from RM48.49 million in the previous year, while revenue grew 4.3% to RM671.19 million from RM643.77 million in FY2022. Swift attributes the increase in net profit to improved revenue, higher other income and lower tax expenses.

Loo says the group, which was listed on the Main Market of Bursa Malaysia in December 2021, has no dividend policy. For FY2022 and FY2021, its dividend per share stood at two sen and 1.8 sen respectively.

Loo expects the growth momentum of the group’s revenue to continue this year, supported by expansion of its warehouse business. He sees challenges ahead, however, given lingering macroeconomic headwinds such as a slowdown in global trade and high interest rates.

“In 2024, our revenue will continue to grow, but margins in the past few years were compressed because of higher finance costs, depreciation and overhead costs.

“In terms of interest rates, we hope this is the peak. But if we can unlock some value of our assets, then maybe it won’t have a full impact this year,” he says. 

Swift has 3,700 employees in Malaysia, Thailand and Singapore.

Confident of staying in the lead

Today Swift is the leading container haulier in the country, with 1,800 prime movers and 5,500 trailers, thanks to its inorganic growth approach. The companies it acquired include Macro Logistics (M) Sdn Bhd, Delta Express (M) Sdn Bhd, DKSH Transport Agencies (M) Sdn Bhd, MISC Integrated Logistics, Tanjong Express, Agenda Wira Sdn Bhd and Sentiasa Hebat Sdn Bhd.

Loo believes that, with a 8% to 9% share of the local container haulage market, Swift can maintain its lead because the second-biggest competitor has a market share of only 2.5% to 2.6%.

“It is very difficult for the competitors to challenge Swift because we have operations right next to our customers. If they call us, we are next door. Size is one thing; you also have to provide other services such as freight forwarding, distribution and warehousing. If you do pure haulage, it is tough,” he says.

“The traditional haulage players focus only on haulage and become price takers, as they cannot provide solutions. There are more than 400 haulage players in the country; most have five to 10 prime movers and are just doing their own cargo. But I have never heard of any forwarders that went into haulage saying they were making a lot of money. Many of them are suffering.”

As to whether Swift is still on the hunt for acquisitions, Loo says: “There is nothing for now. If at all, we are looking at services that we are already doing or more specialised types of logistics such as project logistics. During the good times, this segment contributed RM20 million in profit per year, but this has dropped because of a lack of government jobs and oil and gas investments. In this business, we are asset-light; we are just managing for customers. We do not have the actual equipment to do it. Maybe in the future, we can own our assets in project logistics through the acquisition of a project logistics provider.”

Swift’s cash and bank balances stood at RM159.19 million at end-December 2023, while borrowings totalled RM766.83 million, leading to a net debt of RM607.64 million. It has a net gearing ratio of 0.86 times. Nevertheless, Loo says the group has no plans to raise funds from the capital market.

Loo does not deem Swift to be an integrated logistics service provider just yet, as the group does not provide last-mile logistics services. It has no plans to do so, however, because he believes there are too many last-mile players in the market and local players are struggling to compete. “There are too many players with their own facilities already, and the volume is not big enough,” he says.

Of the six analysts covering Swift, two have a “buy” rating and four a “hold”, with an average price target of 59 sen, indicating a potential upside of 5% from last Thursday’s closing price of 56 sen. At the close of trading last Thursday, its stock was valued at RM493.2 million, with a price-earnings ratio of 8.59 times. 

Source: The Edge Malaysia