We maintain our BUY call on Tasco with an unchanged TP of MYR3.90 (11.3x  FY15F  P/E,  27.5%  upside).  1HFY15  (Mar)  results  came  in  within expectations,  with  both  international  business  solutions  (IBS)  and domestic business solutions (DBS) divisions contributing positively to the group. Contract logistics unit reported the strongest growth and we believe this could be the main earnings growth driver moving forward.  
 
Results  in  line.  Tasco  Malaysia’s (Tasco)  1HFY15  core  net  profit  of MYR18.1m  (+43%  YoY)  came  in  within  expectations,  meeting  53%  of our full-year forecast. Both its international business solutions (IBS) and domestic  business  solutions  (DBS)  wings  recorded  positive  earnings growth  YoY.  Within  IBS,  air freight’s revenue grew 10%  YoY  due  to higher and urgent export shipments from its major customers in 1QFY15, while  ocean  freight  also recorded  slightly  higher  revenue  of  2.5%  YoY, contributed by existing customers of medical supplies and retail sectors. For  the  local  business,  the  contract  logistics  division  remained  strong with a revenue growth of 28% YoY, mainly driven by warehouse and in-plant  businesses,  newly-secured  fast-moving  consumer  goods  (FMCG) customer,  coupled  with  increased  export  shipments  from  existing customers. Among all divisions, contract logistics recorded the strongest growth of 78.7% YoY.

Air freight contribution normalises. Air freight contribution normalised in  2QFY15  as  expected  as  there  were  urgent  shipments  in  1QFY15, which  boosted  its  revenue.  Nonetheless,  we  believe  that  the  contract logistics division, which has performed well so far, will be the main driver of Tasco’s future earnings growth.

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

Maintain  BUY.  We  maintain  our  BUY  recommendation  and  TP  of MYR3.90,  based  on  an  unchanged  11.3x  FY15F  P/E,  which  is  the industry average. Our TP implies a 27.5% upside.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Tasco Bhd is a leading third-party logistics provider.

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Source: RHB