This article first appeared in The Edge Malaysia Weekly on December 6, 2021 - December 12, 2021
SWIFT Haulage Bhd, which is currently undergoing book building for its upcoming initial public offering on Bursa Malaysia, will be utilising part of the RM161.9 million it expects to raise from the exercise to fund the building of a new warehouse in Port Klang Free Zone (PKFZ).
Apart from the new warehouse in PKFZ, Swift will also be utilising part of the proceeds to purchase 30 new prime movers, CEO Loo Yong Hui tells The Edge in an exclusive pre-IPO interview last Wednesday.
The measures are part of the group’s plan to further consolidate its position as the largest haulage service operator in the country.
Swift currently operates 1,546 prime movers, 5,518 container trailers, 811 box or curtain-sider trailers and 53 trucks. It also has 849,371 sq ft of warehouse space.
As part of its flotation exercise, Swift will issue 157.14 million new shares and offer up to 157 million existing shares for sale at an issue price of RM1.03 apiece. Institutional investors will be offered 275.2 million shares and among those who have taken up almost 60% of the shares offered are AIA Bhd, AmFunds Management Bhd, AmIslamic Funds Management Sdn Bhd, Areca Capital Sdn Bhd as fund manager of Areca Dynamic Growth Fund 10 and Kenanga Investors Bhd. The others include HSBC Global Asset Management (Hong Kong) Ltd, Nikko Asset Management Asia Ltd, UOB Asset Management (Malaysia) Bhd and Zurich Life Insurance Malaysia Bhd.
The slew of institutional investors who have taken up the offer shares underscores the strong appetite for Swift’s public offering.
Considering that it has only been around in its current form for a decade, Swift’s growth has been impressive. The group was initially the haulage arm of Yinson Holdings Bhd before it was sold to the current major shareholder, Persada Bina Sdn Bhd, in 2011 for just RM1.
“Swift started when the shareholders took over Yinson Haulage from Yinson Holding back in 2011 and we started fresh in container haulage transportation. So we started with the disposal of all the old trucks of Yinson Haulage and bought new prime movers.
“We started fresh, with new set-ups and management. We changed from Yinson Haulage to Swift in 2012. It was a loss-making company with negative equity, but within the first year, we turned it into a profitable company,” says Loo.
Yinson Haulage’s old prime movers were also disposed of and new ones acquired. Swift now only owns and operates continental-branded prime movers such as Mercedes and Volvo as the running costs are lower than secondhand trucks.
Loo indicates that this has been Swift’s recipe for success all these years, as it has managed to keep operating costs low and margins high.
According to Swift’s IPO prospectus, gross profit margins stood at a healthy 30% level in the financial years from 2018 to 2021. Pre-tax margins were at the high single-digit and low-teens band.
“Basically, to run a haulage business, cost and productivity are important. Everyone pays the same for diesel, the same commission to the drivers and toll. What we can control is the type of truck used, so that is why we bought new trucks and only continental trucks.
“With the new trucks, we know our fuel efficiency. We know our new Mercedes trucks will give us 2.3 to 2.5km per litre of diesel, and service interval on average is every 25,000km, so that is between five and six months. Whereas if we buy secondhand trucks, every month also you need to service. So, it is high productivity and a lower cost base because of using newer trucks,” Loo says.
Over the years, Swift has acquired several logistics companies, including MISC Integrated Logistics Sdn Bhd (MILS) for RM358 million in 2016 — an acquisition which provided Swift a Petronas vendor licence to bid for logistics jobs from the national oil company.
Two years later, Swift acquired Tanjong Express (M) Sdn Bhd, expanding its market share as the company was then the largest haulage operator in the northern region.
These acquisitions helped propel Swift to the position of largest haulage operator in the country within a decade. It claims a 6.5% market share, and in FY2020, handled a total of 588,627 20-foot equivalent units (TEUs).
That Swift owns less than a tenth of the domestic market even though it is the largest player reflects the fragmentation of the industry, and perhaps a need for consolidation.
Swift is eyeing smaller operators in a bid to further consolidate its position as the country’s largest haulage operator, and also to “acquire” their drivers since a shortage of truck drivers is a global issue. Indeed, the biggest pain point in the industry is hiring truck drivers, given the perennial shortage.
“One thing that we always look at when we buy companies ... customer base and assets are not very important, but we are actually acquiring the drivers because it is hard to get drivers these days,” Loo says frankly. “Let’s say if we buy a haulage company with 100 drivers, we immediately get 100 drivers. To employ 100 drivers, it will be a very long process. I can’t find 100 drivers in the market. So, what is important is not the asset or customers, but the manpower.”
Swift’s target for the coming years is to achieve revenue and profit growth of not less than 10% year on year — achievable given that the group has been charting such “normal growth”, Loo says, unless it undertakes acquisitions during the year, or has to undergo an economic lockdown which may impact their clients’ operations.
For example, in FY2020, Swift’s revenue from container haulage decreased by RM26.1 million, or 9.4%, to RM252.7 million, from RM278.8 million in FY2019. That’s because although container haulage operations are categorised as an essential service, customers that were categorised as non-essential services by the government had to decrease their shipments or temporarily halt their operations during some phases of the movement restrictions.
Swift’s land transport business revenue also decreased by 8.9% in FY2020 to RM176 million from RM193.2 million in FY2019 due to the MCO. Meanwhile, revenue from its freight forwarding business decreased by 16.2% to RM54.2 million in FY2020, from RM64.7 million in FY2019.
The PKFZ warehouse to be constructed from the IPO proceeds will enable Swift to relocate its existing warehouse operations, which are currently run from rented premises in Westports. The PKFZ warehouse will have 178,000 sq ft of floor storage and racking space.
Apart from the PKFZ warehouse, Swift will also use the IPO proceeds to acquire the entire equity interest in Ann Joo Properties, which has among others, leased approximately 1.26 million sq ft of land in Bandar Sultan Sulaiman in Port Klang.
Swift will also be expanding its cold-chain storage capacity warehouse in Kota Kinabalu to about 4,500 pallets, from 3,000 pallets. Nevertheless, Swift does not have plans to expand the cold-chain storage and transport business beyond the warehouse in Kota Kinabalu as it does not think that the segments have the growth potential to meet its targets.
Moreover, major players in the segment, namely TASCO Bhd and Tiong Nam Logistics Bhd, also mean stiff competition.
Loo says Swift is also an investor in a mega warehouse project that is set to be the largest logistics hub in Southeast Asia. The mega warehouse, through Global Vision Logistics Sdn Bhd in which Swift has a 25% stake, will be built on a 71-acre tract in Section 16, Shah Alam.
Apart from Swift, other investors in the project include the Aspen Group — a Malaysian property developer listed in Singapore — and two other investors, each holding a 25% stake. The plan is to build a logistics hub with 5.8 million sq ft or floor area, says Loo.
“We target to break ground next year and complete the first phase of about 3 million sq ft by 2024. We are looking to get marketplace players such as Lazada and Shopee because they are the ones that keep on expanding, so they definitely need more space.”
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's App Store and Android's Google Play.