Tasco’s  1QFY15  came  in  stronger  than  expected.  Almost  all  its divisions  reported  positive  revenue  and  earnings  growth  except  its trucking  division,  which  posted  losses. Nonetheless, the overall group earnings  almost  doubled  y-o-y.  We  believe  improving  trade  activities should  bode  well  for  Tasco’s  earnings  going  forward.  We  keep  ourearnings forecasts, BUY call and MYR3.00 FV unchanged.

Above expectations. Tasco Malaysia’s (Tasco) 1QFY15 core net profit of  MYR10.0m  (+96%  q-o-q,  +74%  y-o-y)  came  in  stronger  than expected.  For  the  quarter  under  review,  total  revenue  and  earnings improved 29.2% y-o-y and 74% y-o-y respectively. Both its international business  solutions  (IBS)  and  domestic  business  solution  (DBS)  wings recorded  positive  earnings  growth  y-o-y.  Within  IBS,  its  air  freight’s revenue  grew  24%  y-o-y  due  to  higher  and  urgent  export  shipments from  its  major  customers,  while  ocean  freight  recorded  a  13%  y-o-y revenue increase,  mainly driven by  shipments of project cargo.  For the local  business,  contract  logistics  recorded  a  revenue  growth  of  50% y-o-y,  helped  by  newly-secured  fast-moving  consumer  goods (FMCG)customers  as  well  as  increased  volume  from  existing  customers.  The trucking  unit  is  the  only  division  that  recorded  flattish  revenue  growth and a loss before tax of MYR0.3m due to higher fuel and subcontracting costs.  Nonetheless,  Tasco’s overall margin improved by  1.9ppts  y-o-y due  to  strong  demand  for  its  services,  particularly  its  warehouse,  inplant and haulage businesses, which drove its contract logistics’ pre-tax profit up MYR7.4m (+148.2% y-o-y).

Outlook.  We  are  of  the  view  that  global  and  local  economies  are improving  gradually,  which  should  bode  well  for  Tasco’s  earnings moving forward.

Maintain  BUY.  To  be  prudent,  we  make  no  changes  to  our  earnings forecasts,  given  that  certain  factors  such  as  subsidy  rationalisation, minimum wage review  and  stiff competition  in  the industry may impact its  earnings.  We  keep  our  FV  at  MYR3.00,  pegged  to  the  industry average P/E of 11.3x. 

Source: RHB