Tasco’s acquisition of Sabah-based cold-chain logistics firm to strengthen lead in Malaysia — MIDF Research
22 Apr 2021
KUALA LUMPUR (April 22): Tasco Bhd’s move to acquire Sabah-based cold chain logistics company Hypercold Logistics Sdn Bhd will further cement its leading cold chain services in Malaysia, according to MIDF Research.
MIDF analyst Ummar Fitri said in a note today that the acquisition marks Tasco’s first foray into East Malaysia as the group has no cold chain logistics presence there.
According to him, Tasco’s Cold Supply Chain Logistics (CSCL) is currently the largest cold chain provider in Malaysia, with an estimated 35% market share of the segment, with key customers consisting of fast-moving consumer goods retailers, food and beverage (F&B) players and pharmaceutical groups.
Its biggest cold storage warehouse is in Shah Alam, with a 26,000 pallet capacity and a built-up area of 330,000 sq ft. Other locations include Pulau Indah, Port Klang and Bukit Raja.
“Tasco currently has a 50,000 to 52,000 pallet capacity. With the addition of Hypercold, Tasco’s capacity will be increased to approximately a 53,000 to 56,000 pallet capacity,” he said.
He revised his earnings forecasts for Tasco for the financial year ended March 31, 2021 (FY21) to RM41.4 million (from RM41 million) and FY22 to RM46 million (from RM45.7 million).
“We apply conservative assumptions over the impact of this acquisition on our earnings forecasts. Our estimates follow the parameters of historical precedents with single-digit revenue growth for Hypercold and a high double-digit profit margin for the target company,” he said.
Moving forward, he expects Tasco to see improved earnings, underpinned by a growing top line for its International Business Solutions (IBS), brisk recovery of the Domestic Business Solutions segment (DBS), and a margin expansion via the Investment Tax Allowance scheme of the Malaysian Investment Development Authority (MIDA).
“All things considered, we maintain our ‘buy’ call for Tasco,” he said.
He also revised his target price (TP) for Tasco to RM1.38 per share post-split exercise from RM1.31 previously.
“Our TP is derived by pegging our FY22 earnings per share (EPS) [estimate] to a revised forward price-earnings ratio (PER) of 24 times (previously 23 times). Moving forward, we believe the earnings outlook for Tasco remains sustainable,” he added.
Tasco announced yesterday that its 70%-owned unit, Tasco Yusen Gold Cold Sdn Bhd (TYGC), is teaming up with Swift Integrated Logistics Sdn Bhd to jointly acquire a 50% stake in Hypercold for RM10.55 million.
Hypercold is involved in the provision of cold chain related logistics, warehouse storage and transportation of goods.
According to the group, Hypercold has the largest cold chain warehouse in Sabah with a capacity of 3,000 pallet space and eight temperature-controlled trucks.
At 10.33am today, Tasco had fallen one sen or 0.81% to RM1.23, valuing the group at RM960 million.
Source: The Edge Markets