Tasco  reported  MYR30m  core  net  earnings  (+6.7%  y-o-y)  for  FY14  (15 months on its FYE  change to March),  ie  in line with our estimates.  The group  is  poised  to  grow,  moving  forwards,  on  the  recovery  in  global trade.  We  adjusted  our  earnings  model  accordingly  to  reflect  the change in FYE.  Upgrade to BUY  (from Neutral)  with  a  higher MYR3.00 FV (from MYR2.30) premised on a target P/E of 11.3x FY15 earnings.

• Results  in  line.  We  deem  Tasco  Malaysia  (Tasco)’s  15MFY14,  ie financial  year  end  (FYE)  changed  to  March  from  December,  core  net profit of MYR30m (+6.7% y-o-y)  as  within expectations.  For the quarter under  review,  total  revenue  and  earnings  improved  24.8%  y-o-y  and 18.6%  y-o-y  respectively.  This  indicates  that  its  earnings  visibility  has improved  vs  1QFY13  on  stronger  trade  activities.  Both  its  international business  solutions  (IBS)  and  domestic  business  solution  (DBS)  wings recorded  positive  growth  in  earnings  y-o-y.  Within  IBS,  both  air  and ocean  freight  recorded  higher  revenue  by  30%  and  36%  y-o-y respectively with  the latter saw  a higher margin expansion of 3 ppts y-oy.  Whilst  for  the  local  business,  contract  logistics  recorded  revenue growth  39%  y-o-y  while  margins  improved  by  3ppts  y-o-y.  Tasco’s trucking  division  was  the  only  business  that  booked  negative  revenue growth  of  23%  y-o-y.  This  was  due  to  intense  competition  within  the industry.  On a q-o-q basis, both revenue and earnings came in lower  on seasonality. A 5 sen final dividend was also declared  during  the quarter under review.
• Outlook. We are of the view that global and local economies are  seeing gradual  improvements,  which  should  bode  well  for  Tasco’s  earnings moving forward.
• Valuation model reviewed.  We  refine  our  earnings  model  accordingly to  match  the  change  in  Tasco’s  FYE.  We  expect  a  high  single-digit growth of 7.6% in FY15F for the logistics provider.
• Upgrade to BUY.    We  raise  Tasco’s  FV to MYR3.00 (from  MYR2.30), pegged to a higher PE of 11.3x  –  the  industry average  –  from 8x earlier on its FY15 earnings. Upgrade to BUY (from Neutral).

Source: RHB