INVESTMENT HIGHLIGHTS

• Commendable market share of ~31% in the local cold chain supply scene

• TYGC ranked top amongst local peers in terms of revenue and profitability

• Latest restructuring of convenience and retail logistics under TYGC to expand client base and enable cross selling with other business segments

• Robust retail trade and household expenditure to sustain demand for cold supply chain services

• No changes made to earnings estimates

• Maintain Trading BUY with unchanged TP of RM1.82 per share

Commendable share in the local cold supply chain scene. Nationwide, the entire cold chain sector is currently estimated to be about 120,000 pallet positions. Meanwhile, Tasco’s cold supply chain business under its subsidiary, Tasco Yusen Gold Cold Sdn Bhd (TYGC) commands roughly 31% of the local market share with 37,000 pallets. TYGC’s key customers comprise of companies from various industries namely manufacturing, wholesaling and retailing.

Comparison amongst local industry peers. Based on a comparable analysis of TYGC against its local peers, we found out that TYGC ranks the highest in terms of revenue, profit before tax and profit after tax (refer to Table 1). As such, we view the cold supply chain business as a potential catalyst to Tasco despite the 12-13% contribution to the overall revenue currently. We expect this contribution to continue to expand.

Latest restructuring to expand F&B clientele. According to the management, Tasco had restructured its retail and convenience logistics business under TYGC, effective 1 April 2019. This is to expand TYGC’s main clientele of food and beverage companies to include convenience stores, petrol kiosks and pharmacies. As such, we believe that Tasco could possibly reach 50,000 pallets position within less than a year. This could be achieved via the acquisition of spaces from existing cold supply chain companies. Tasco noted that the cost per pallet which is acquired is cheaper by more than 50% as compared to setting it up from scratch.

Synergies via potential cross selling. In addition, Tasco plans to cross sell its cold chain business with clients from its other business segments, mainly contract logistics. For example, an existing client under Tasco’s contract logistics business may need transporting of products that require an environment with controlled temperature. From here, TYGC’s services can be extended to this client, offering a more holistic logistic solution.

Source: MIDF Research - 18 Apr 2019