Results

• Tasco Berhad (Tasco) posted a net profit of RM16.3, in its 4QFY21 result, against a net loss of RM0.4m a year ago and up 4.5% QoQ. Overall, the Group achieved net earnings of RM41.3m in FY21, which surged 364.2% as compared to FY20.

• Result much higher than expectation. The Group’s performance is much higher than our estimate which accounts for 119% of our full year forecast of RM34.7m.

Comments

• Remarkable performance of International Business Solution (IBS) segment underpinned by Air Freight Forwarding propelled quarterly result. The Group posted RM10.2m PBT for IBS in 4QFY21 which soared 501.5% YoY and 48.2% QoQ. The profit surge in IBT segment was largely underpinned by it Air Freight Forwarding (AFF) business, +590.3% YoY and +42.8% QoQ mainly due to the better margin on elevated airfreight rates due to the reduced airfreight supply capacity amid the Covid-19 pandemic. Meanwhile, Ocean Freight Forwarding (OFF) business PBT jumped +288.4% YoY and +76.5% QoQ mainly due to rising sea freight arising from global containers shortage.

• Better full year performance of Domestic Business solutions (DBS) segment underpinned by Contract Logistic (CL) and Cold Supply Chain (CSC) division. PBT on DBS segment in FY21 recorded RM42.3m which increased 52.2% as compared to FY20. CL business recorded +28% YoY increase in PBT for FY21 mainly due to increased revenue from Custom Clearance which largely contributed by a solar panel customer. CSC division remained robust by recording RM9.9m in FY21 (+102.4% YoY) on the back of increased contribution from the ice cream, retail and poultry customers.
   
• Acquisition and expansion to East Malaysia…… Tasco via its subsidiary, TASCO YUSEN GOLD COLD (TYGS) has recently entered into a conditional share sale agreement for acquisition of with 50% equity interest in Hypercold Logistic Sdn Bhd. Hypercold is involved in the provision of cold chain related logistics, warehouse storage, and transportation of goods. According to the management, Hypercold currently has the largest cold chain warehouse capacity of 3,000 pallet space as well as 8 temperature controlled trucks in Sabah.
   
• …….further consolidate Tasco's leading position in the cold chain logistics service industry in Malaysia. The Group’s Cold Supply Chain (CSC) currently is the largest cold chain supplier in Malaysia, with a market share of approximately 35%. By undertaking the acquisition jointly with Swift Integrated Logistics (SILSB), Tasco will be able to leverage on the customer base of SILSB in East Malaysia for their expansion. However, earnings contribution wise, we do not expect to see any significant earnings impact to the Group in the short term as effective stake is 35% to be recognized under its associate level coupled with current net earnings of merely RM1m delivered by Hypercold.
   
• Potential benefit from the vaccine rollout on cooperation with MAB Kargo Sdn Bhd (MASkargo). Tasco has also entered an MOU with MASkargo earlier to collaborate on providing transportation and distribution services for COVID-19 vaccine in Malaysia. The cooperation may be fruitful for Tasco as the Group is able to leveraging on MASkargo’s core competencies as an airfreight carrier as well as its knowledge in cargo handling for bidding the transportation and distribution of vaccine in the later stage.

Earnings Outlook

• We maintain our FY22F net profit of RM41.1m and introduce our FY23F net earnings forecast of RM42.9m.

Valuation/Recommendation

• Maintain HOLD with a higher target price of RM1.21 (RM0.93 previously) after ascribing a higher PE multiple of 23.5x FY22F (from 18x) which is at its +0.5SD of 3-year mean PE.

• Positives priced in. We opine that the share price has factored in the positives and valuation is fairly price at this junction. We believe that the exceptional and exponential earnings growth in FY21 was mainly due to unsustainable high freight charges pursuant to the shortage of supply during the pandemic.

Source: JF Apex Securities Research - 28 Apr 2021