INVESTMENT HIGHLIGHTS

• 1HFY18 results below forecasts

• Bottomline lagged due to higher than expected costs and lower contributions from acquisitions

• International revenue bolstered by external trade

• Domestic revenue boosted by regional distribution hub

• Revise earnings downwards

• Maintain BUY with revised TP of RM2.68

1HFY18 core PATAMI below estimates. Tasco recorded 2QFY18 core PATAMI of RM9.2m (+13.7%yoy), bringing its cumulative 1HFY18 core PATAMI to RM16.2m (+14.6%yoy). This fell short of our and consensus estimates, representing 33% and 37% of the full year forecasts respectively. The deviation is attributed to higher than expected costs and lower contributions from acquisitions, where the synergistic financial impact will only be felt in FY19. This is later than our earlier estimate, as we had forecasted the acquisitions to conclude by 1HCY17/1QFY18.

International segment topline grew 18.3%yoy in 2QFY17. Tasco’s air and sea freight forwarding revenue grew +11.9%yoy and +27.9%yoy respectively, underpinned by higher exports volume which climbed 7.9%yoy in September, the highest on record. On a micro level, Tasco’s newly acquired office equipment, lighting, musical instrument manufacturing and aerospace clientele translated into an increase in shipment volumes.

Domestic segment revenue rose by +36.6%yoy as contribution of its cold chain logistics division has kicked in, which resulted in RM18.3m postacquisition revenue. Aside from that, the commissioning of the regional distribution centre for Renesas boosted revenue for the contract logistics division. Both of these sub segments served as a cushion for the loss before tax incurred in the trucking division due to the increase in fuel price combined with imbalance trips.

Revise earnings downwards. We are revising down our earnings estimates for FY17 and FY18 by -23.6% and -16.5%, respectively. This is to reflect lesser than expected contributions from acquisitions and higher cost estimations.

Source: MIDF Research - 17 Nov 2017