KEY INVESTMENT HIGHLIGHTS

• 1QFY21 normalised PATAMI below estimates.

• Strength in the IBS came from soaring airfreight rates due to reduced supply of capacity

• Opposite impact on Ocean Freight

• Contribution from Air Freight division to offset any decline from other segment

• Maintain NEUTRAL with unchanged TP of RM0.80 per share

1QFY21 normalised PATAMI below estimates. Tasco recorded 1QFY21 normalised PATAMI of RM2.6m (>+350.1%yoy). Despite the profitability and growth, it missed our estimate at 18% for FY21E. The higher-than-expected earnings were due to the significant increase in other income (69.1%yoy) and higher contribution from International Business Segment.

International segment (IBS) PBT increased by 51.8%yoy in 1QFY21. Tasco’s Air Freight Forwarding (AFF) segment saw increased PBT to RM3.4m compared to RM1.2m in 1QFY20. Strength in the IBS came from soaring airfreight rates due to reduced supply of capacity as businesses rushed to clear backlog shipments from sea transportation to air mode. The positive PBT is recorded on the back of higher revenue during the quarter of RM54.7m, (+51.8%yoy). Meanwhile, the increase in AFF revenue was mainly contributed from Electric and Electronic segments as well as cigarettes and tobacco customers.

Adverse impact felt by Ocean Freight. Meanwhile, the factor that drove the stellar performance of the AFF segment during the quarter is seen to have worked against its Ocean Freight segment. As more customers opt to switch from sea mode to air mode, it contributed to the decline in revenue by -12.85yoy to RM21.6m. As a result, the segment recorded a loss before tax of -RM0.50m for the quarter.

Domestic division severely hit by MCO. All around, Contract and Trucking segments recorded decline in PBT at RM2.7m and -RM1.6m, - 50.2%yoy and -2.7%yoy. This is on the back of decline in revenue to the tune of RM60.2m (-16.7%yoy) and RM10.6m (-42.8%yoy). However, Cold Storage division cushioned the earnings erosion from other two segments with a positive performance derived from its new grocery store and dairy product customer. Revenue increased by 17.6% and more than doubled its PBT at RM2.9m for the quarter. This poor performance of domestic division was due to the temporary closure of businesses and production activities attributable to the enforcement of the movement control order (MCO) during the quarter

Source: MIDF Research - 27 Aug 2020