FY15’s 16.5% YoY core net profit growth is a slight 4% miss, nonetheless, we leave our projections unchanged. Maintain BUY and MYR4.76 TP (13x FY16F P/E, 10% upside). We expect TASCO’s warehousing business to be the key topline driver in attracting newlogistics contracts and it could see its warehouse space capacity potentially increasing by at least double over the next three years.

• Slight miss but earnings outlook intact. TASCO posted a FY15 (Mar) MYR30.7m core net profit (+16.5% YoY) on MYR494.3m revenue (+5.9% YoY). Both international and domestic segments booked growth, with warehousing (+12.3% YoY) and haulage (+61% YoY) the strongeston higher demand cargo from fast-moving consumer goods (FMCG)businesses. Margin expansion was also evident in these two divisions,as the higher volume gave boost to economies of scale.
• Forecasts. We leave forecasts unchanged. We expect warehousing to be the key topline driver in attracting new contracts, which should spur revenue contribution for haulage and other segments. We understand TASCO is aggressively seeking new warehouse space and will also refurbish its existing 1-floor headquarters into a multi-story warehouse(+500,000 sq ft). MYR200m total capex has been allocated for the next three years for this and its fleet expansion, notably in Iskandar Malaysia (200,000 sq ft) and Westports (500,000-600,000 sq ft). TASCO could see warehouse space capacity potentially increasing by at least 2x over the next three years. These expansions will be done progressively.
• Expanding to last mile delivery? We understand TASCO is seeking to possibly venture into the courier business with a potential partner and isalready evaluating options, we believe. This would likely be viaacquisition of an established player instead of a fresh set-up. However, as TASCO intends to have a majority stake, it could be a stumbling block, in our view. Pricing is also a hurdle given the higher valuation courier players typically command. TASCO’s efforts to go into last mile delivery makes business sense as its warehouses are already serving consumer electronic players, FMCGs and fashion retailers. Traditional brick and mortar retailers are progressing fast to provide online offerings, ie riding on the e-commerce bandwagon.
• Maintain BUY. We maintain our BUY call and MYR4.76 TP (13x FY16 P/E). The balance sheet for TASCO’s expansion plans appears manageable, noting the promising earnings outlook ahead.