On Tuesday, we attended the briefing by TASCO as part of theInvestor Relations Day co-organized by Malaysia Investor Relations Associationand ZJ Advisory. The briefing reaffirmed our view of TASCO as the top pick in our Logistics universe for its: (i)healthy growth in its sea and air freight business, (ii) expanding 3rd PartyLogistics volume from its existingclients, and (iii) low PER, at 6x FY12 EPS vs the industry average of 7x. Wekeep our BUY call, but upgrade our FV from RM2.33 to RM2.48, pegging the stockat a slightly higher PER of 7x, which is in line with the industry average PER,from 6.5x previously.
Volume growth to staystrong. In tandem with the global economic recovery, and the receding riskof a double-dip global recession, we gather that domestic trade activities as wellas in that in the Asian region areimproving. As can be seen in Figures 2 and 3, exports to Japan, Asean and USimproved by 25%, 20% and 9% y-o-y respectively. Leveraging on its Japanesemajor shareholder, NYK Group's global logistic network and expertise, wecontinue to like TASCO, which is well-positioned to ride on the revenue growth, boosted by increasingshipments and the provision of totallogistics solutions. We also expect its shipments of LCD and plasma TV to pick up strongly in 2HFY12 owingto the upcoming 2012 Olympics and Euro 2012. Note that in 2010, TASCO's earnings soared 134% to RM23.4m on the back of urgent air freight shipments of TV setsduring the World Cup in South Africa. Elsewhere, we are positive on the group's auto CBU division, whichprovides Auto Pre-Delivery Inspection(Auto PDI) to Honda, Ford, VW and Volvo. Although this division's earnings contribution to thegroup is still relatively small, we are optimistic that it will flourish shouldHonda's plans to localize and expand its production in Malaysia materialize.
3PL still the main growth engine. We think thesteady expansion of production by its existing clients, mainly MNCs in the fastmoving-consumer good business and E&E products with strong brand names,will ensure the group continues to record healthy growth in its high-margintotal logistics division. Total logistics involve the provision of comprehensivesolutions encompassing warehousing services as well as air, sea and landfreight services. We also gather from management that it saw some urgentcontract logistics shipments of E&E and FMCG products in 1Q, particularlyfrom Feb-Mar. Hence, as we believe the group will continue to register bettery-o-y numbers, we are optimistic on its upcoming 1Q results due to be announcedon 3 May.