KEY INVESTMENT HIGHLIGHTS

• Tasco has entered a MOU with GDEX

• Essentially, to improves its logistics services and be able to cater for more complex logistics demands

• Leverage GDEX’s last fulfilment capabilities

• Earnings forecast maintained

• Downgrade to Neutral with revised TP of RM2.85 per share

Signing MOU with GDEX. Based on yesterday’s announcement, Tasco has entered a Memorandum of Understanding (“MOU”) with GDEX. The objectives of the MOU are to leverage and utilize each other strengths; (i) develop and organise joint marketing activities utilising the network and capabilities of both entities, (ii) advance the development of seamless connectivity of e-commerce and other social commerce platforms with logistics fulfilment services, (iii) enhance knowledge sharing with a view to foster improved co-ordination and synergies. Essentially, the MOU is vital point for Tasco to improves its logistics services and be able to cater for more complex logistics demands from its customers.

Specific benefits to Tasco. Specifically, Tasco will be able to leverage GDEX’s last fulfilment capabilities and cooperate with GDEX strategic shareholders, namely Yamato Holdings Co., Ltd and Singapore Post Limited. Furthermore, Tasco can strengthen its regional footprint in Indonesia and Vietnam through relationship via PT Satria Antaran Prima Tbk and Noi Bai Express and Trading Joint Stock Company. Recall that GDEX owns 44.50% equity stake in PT Satria and 50% of shares in Noi Bai Express and Trading JSC. Besides a strategic collaboration, this MOU will promote greater e-commerce integration between Tasco’s fulfilment solutions with GDEX’s online shipping platform. This allows major emarketplaces and web stores to be fused with express courier services.

Our takes on the MOU. We applaud the management on bridging this relationship with GDEX. We believe this will bring mutual benefits for both companies in strengthening their service offerings and capabilities. We are hopeful on the impact of such relationship to the financial performance of Tasco. Noteworthy to highlight, based on management disclosure, the MOU is also not expected to have any immediate material impact on the balance sheet and earnings of the group. Pending guidance from management, we believe there is a possibility of more concrete impacts on the group earnings post 2021.

Earnings forecast maintained. At this juncture, it is still premature to estimate any earnings contribution from this collaboration as it is still at a very early stage.

Target price. Taking all into consideration, we are revising our target price to RM2.85 (from RM2.56 previously). Our target price is derived by pegging our FY22 EPS to a revised forward PE ratio of 13.0x (previously 11.7x) – which is the current mean of B/F 2 years P/E ratio.

Downgrade to Neutral. All things considered, we believe that all the positives have been priced in at this juncture. Recall that Tasco share price has staged an impressive rally this year, more than +200% increase since early January 2020. Hence, we are downgrading our recommendation on Tasco to NEUTRAL (from BUY previously). Key risks to our call are: (i) lower than expected saving from Investment Tax Allowance Scheme and (ii) sharp drop in air freight forwarding rates due to return of capacity for long haul “belly” cargo space and (iii) significant earnings contribution from collaboration with GDEX.

Source: MIDF Research - 9 Dec 2020