Tasco in for stronger quarters ahead
31 Jan 2024
This was despite the integrated logistic group’s latest results for the third quarter of financial year 2024 (3Q24), which missed most analysts’ expectations.
Tasco’s net profit dropped 32.37% to RM13.82mil in 3Q24 from RM20.44mil a year earlier, on the back of freight rate normalisation and weaker performance from its domestic business solutions (DBS) segment.
According to Apex Securities, Tasco is expected to benefit from the recovery in external trade momentum and resilience in the domestic economy, with the World Trade Organisation forecasting a higher pickup in global merchandise trade volume of 3.2% year-on-year in 2024.
Cautious optimism is placed over the recovery in the technology sector, manufacturing activities and the China economy, it added.
The research house said the Red Sea crisis will likely boost Tasco’s short-term outlook in the ocean freight forwarding (OFF) segment with higher rates.
The group’s international business solutions (IBS) segment is also expected to recover on improved external trade performance, while the DBS segment is poised for further improvement, supported by firm warehouse and cold supply chain demand, coupled with new warehouse capacity added in.
This is expected to start contributing to the group in 4Q24, Apex Securities said.
In terms of valuation, the research house has trimmed Tasco’s earnings forecast to RM62.9mil for financial year 2024 (FY24) from RM71.7mil earlier and its FY25 forecast to RM81.5mil from RM85.4mil previously, to account for weaker margin expectation on its OFF segment.
“Still, we reiterate our ‘buy’ recommendation on Tasco with a lower target price (TP) of RM1.12, post-earnings revision,” it added.
For RHB Research, Tasco is still a “buy” with a TP of RM1.35.
“We expect Tasco to book stronger numbers ahead, supported by a recovery in trade activities, sector tailwinds, contributions from new warehouses and recognition of tax incentives,” it said in a note to clients.
It added that Tasco’s valuation is attractive, given its diversified business segments, solid cash flow generation, healthy dividend yields and growth prospects.
“We maintain our earnings forecast for now, pending a post-results briefing and guidance,” it said.
RHB Research also expects Tasco to record a much better performance in 4Q24 and beyond. This is primarily supported by maiden contributions from its new warehouses, which should fetch wider margins, tax savings credits from integrated logistics services’ tax incentive that lowers the effective tax rate to between 10% and 14%, and further pick-up in trade activities within the intra-Asia region.
“The uptick in freight rates stemming from the ongoing Red Sea crisis should serve as a tailwind to support Tasco’s IBS segment, which would be reflected in 4Q24 onwards,” said RHB Research.
Similarly, MIDF Research expects stronger quarters ahead for Tasco. It has kept a “buy” call on the stock with an unchanged TP of RM1.30.
“The ocean freight rates are on the rise due to the Red Sea geopolitical crisis, where the Houthis have targeted commercial ships.
“While this circumstance is expected to benefit logistics players such as Tasco, the immediate impact remains limited as shipment volumes have not substantially picked up,” it noted.
Nonetheless, MIDF Research maintained its expectation of an increase in handling volume, anticipating a gradual recovery of trade activities throughout the year.
“We also expect improved performance in the contract logistics division from 4Q24 onwards, driven by the inaugural contributions from the two new warehouses, West Port Logistics Centre and Shah Alam Logistics Centre, which are expected to yield better rates,” it said.
MIDF Research has maintained its earnings estimates on Tasco, with a potential revision pending further insights from a scheduled management briefing on Feb 5.
Source: The Star