INVESTMENT HIGHLIGHTS

• 12MFY17 results below forecasts

• International segment topline grew +25%yoy in FY17

• Sturdy performance from the domestic business

• Maintain BUY with a target price (TP) of RM2.91

Unfazed by slight earnings miss. Tasco recorded 4QFY17 core PATAMI of RM4.7m (+71%yoy), bringing its cumulative 12MFY17 core PAT to RM27.5m (+17%yoy). This made up 88% of our full year forecast, representing a variance of -RM3.5m. The shortfall was largely attributed to Tasco’s air freight business which incurred start-up costs in relation to a newly secured E&E export contract that was secured through competitive bidding.

International segment topline grew +25%yoy in FY17. Both the air freight and sea freight divisions saw revenue growth underpinned by a rebound in external trade growth beginning in the second half of 2016. Sector wise, Tasco’s E&E, aerospace, solar panel, telecommunication and garment manufacturing clientele witnessed expanding export shipment volumes to Europe, North America and Japan.

Sturdy performance from the domestic business. Revenue and PBT for FY17 grew +5%yoy and +13%yoy respectively. We gather that the domestic division was lifted by the custom clearance and haulage businesses which benefitted from increased import & export activity. Both these sub-segments were sufficient to cushion a slight decline in the warehousing and in-plant sub-segments due to some weakness in Johor.

Maintain BUY with a target price (TP) of RM2.91, derived from a forward FY18 price-to-earnings ratio of 12x. We see positive impetus for Tasco in FY18 with acquisition of cold chain logistics assets. This would bode well for Tasco, as it is propelled from having nil cold chain assets to a market leader in the segment. Apart from that, a nascent recovery in international trade growth and an improving manufacturing sector would augur well for the company, in our view.

Source: MIDF Research - 29 May 2017