INVESTMENT HIGHLIGHTS

• Proposed acquisition of seven parcels of leasehold land in Port Klang for RM25.8m

• In line with Tasco’s cost effective strategy to expand cold supply chain facility via acquisition

• Strategic location of land assets to facilitate better flow of operations

• No material impact towards gearing levels

• Earnings estimates unchanged as impact on slight increase in financing cost will take effect in FY21

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

Proposed acquisition of seven parcels of leasehold land in Port Klang. Tasco via its subsidiaries, Gold Cold Solutions Sdn Bhd (GCS) and Titian Pelangi Sdn Bhd (TPSB) had on 10 May 2019 entered into a sales and purchase agreement with Hai San Holdings Sdn Bhd (In Liquidation) and Hai San & Sons Sdn Bhd (In Liquidation) (collectively referred to as HSH) for a proposed acquisition of seven parcels of leasehold land with the size of 16.3 acres (66,229m2) for a total cash consideration of RM25.8m on an “as is where is basis”. The proposed acquisition is expected to be completed in 2HCY19 and will increase Tasco’s land acreage in Port Klang from 39 acres to 55 acres. The parcels of land are located within an established industrial neighbourhood of: (i) North Port, (ii) Kawasan Perusahaan Selat Klang Utara and (iii) Perdana Industrial Park.

Our view. Out of the seven parcels of land, one parcel with a land size of 25,114m2 has a cold supply chain facility while another three with factories and a warehouse. As such, we are positive on the news as the proposed acquisition indicates Tasco’s plan of expanding its current cold supply chain capacity of approximately 37,000 pallets with an average utilisation rate of above 80% via the acquisition of spaces from existing cold supply chain companies. This is a cost strategic move as the cost per pallet which is bought over is cheaper by more than 50% as compared to setting it up from scratch.

Strategic location of land assets to facilitate operations. The seven parcels of land is located 20km from Tasco’s Westports Logistics Centre in Pulau Indah which is a free commercial zone logistics hub equipped with cold supply chain facility of roughly 10,000 pallets. Therefore, the close proximity of the land assets to the Westports Logistics Centre provides convenience to better manage Tasco’s warehousing operations within the vicinity of Port Klang.

Source: MIDF Research - 13 May 2019