TASCO Bhd’s earnings momentum is expected to sustain into the financial year 2022 forecast (FY22F), buoyed by solid top-line growth, recovery in freight traffic and utilization of its integrated logistics services (ILSs) tax allowances.
RHB Investment Bank Bhd (RHB Research) analysts Lester Siew and Lee Meng Horng said Tasco’s top-line growth will carry over into FY22F, driven by a recovery in freight volumes post-pandemic in addition to new business customers secured.
“These should also help support the international segment’s margins, while the constrained air and sea freight conditions worldwide appear unlikely to be resolved anytime soon,” they said in a note recently. Tasco is set to reap the benefits of its ILSs investment tax allowances from FY22 onwards as it embarks on a multi-pronged expansion drive, which should result in much lower effective tax rates, as well as a larger base of income-generating logistics assets over the coming years.
RHB Research is keeping its ‘Buy’ call on Tasco with a higher target price of RM1.65 from RM1.45 previously, pegged to an unchanged 22 times price-earnings on its calendar year 2022 forecast (CY22F) earnings per share.
“We continue to like Tasco for its strong earnings trajectory, scarcity of listed logistics players with similar operational and growth profiles, and undemanding valuation while trading at a 30% discount to regional peers around 24 times,” it said.
RHB Research noted that key downside risks to its call include a weaker than expected recovery in freight volumes, and higher than expected operating expenses.
The group’s FY22-FY23F earnings were raised by 13%-14% mainly after incorporating higher revenue contributions from both its international and domestic business segments.
The research firm also included Tasco’s recent acquisition of Sabah-based Hypercold Logistics Sdn Bhd and introduced its FY24F projections at the same time.
Tasco’s FY21 results overshot expectations, accounting for 118% and 112% of RHB Research and consensus estimates respectively.
The group’s record-high profit after tax and minority interest of RM41.3 million, an increase of 364% year-on-year (YoY), came on the back of robust results in the fourth quarter of FY21, primarily led by its international freight forwarding segment alongside favourable foreign-exchange movements.
The strong numbers seen at its international segment were underpinned by a still tight freighter capacity in the market. Concurrently, Tasco has also secured more chartered flights for its customers.
Its domestic logistics segment continued to chalk up higher revenue with an increase of 12% quarter-on-quarter in spite of the imposition of the Movement Control Order 2.0, owing to the sturdy performance of its contract logistics and trucking divisions.