What’s New

• Tasco Berhad (Tasco) announced that its wholly owned subsidiary Titian Pelangi Sdn Bhd had on 12 Jan 2018 entered into a Sale and Purchase Agreement with Onostatic Sdn Bhd for the disposal of a warehouse and office building in Port Klang for RM17.5m.

• The said property consists of land area approximately 339,676 sf and a net floor area of 144,648 sf. It has a 99 years leasehold tenure expiring on 9 Jun 2086.

Comments

• Fair Selling price. We understand that the land is valued by ITAC International (Kajang) Sdn Bhd using comparison method approach with an indicative valuation of RM18.5m. Meanwhile, based on our simple DCF calculation we gathered a value of RM16.5m by assuming rental of RM3 per sf per month and a discount rate of 6.5%.

• Proceeds will be utilized as working capital. We learnt that RM16.8m out of the disposal price of RM17.5m will be utilized as working capital after paying the expenses on disposal (RM650k).

• An estimated one-off gain of RM5.48m will be recorded from the exercise. The one-off disposal gain of RM5.48m, which is equivalent to 2.7 sen based on current shares based will be recorded after completing the exercise.

• Overall, we are positive with the disposal of the warehouse as it unlocks and realizes capital appreciation of the property without having disruption towards its business (Tasco plans to shift its current warehouse facility to elsewhere).

Earnings Outlook

• No change to our core earnings forecast for FY18 and FY19 as it is one-off exceptional item.

• Major risks: 1.) Higher fuel price, 2.) Change in government policy, 3.) Hiccup in performance due to loss of major customers, and 4.) Slowdown in domestic and overseas economy.

Valuation/Recommendation

• Maintain BUY call for Tasco with an unchanged target price of RM2.69. Our valuation is pegged to 13x FY2019F PER. Our target PE valuation is slightly higher than the average forward PE of its peers of 12.8x in view of its commanding position in the sector and at the range of upcycle forward PE. Overall, we are sanguine on its future growth following its venture into cold chain market. With this, Tasco is able to generate synergies across all of its divisions and provide integrated logistics services for its clients.

Source: JF Apex Securities Research - 16 Jan 2018