• Still BUY, new MYR2.03 TP from MYR1.90, 72% upside and c.3% yield. TASCO beat expectations, recording yet another set of record-high numbers in 4QFY22 (Mar) on stronger performances from its international business (IBS). We remain optimistic on its growth prospects, driven by positive throughput in the face of a broader economic reopening and contributions from new business wins. The stock’s below-peer valuation presents an attractive proposition for investors to capitalise on this leading logistics player with strong earnings delivery and robust growth momentum.

• Above expectations. TASCO booked a 4QFY22 core profit of MYR25m (+19.5% QoQ, +52.9% YoY). In deriving our full-year core profit, we stripped out the MYR15.9m write-off related to the 3QFY22 demolition of its warehouse. FY22 core profit of MYR77.4m exceeded expectations, at 108% and 121% of our and Street’s full-year estimates – thanks to the strong IBS, which led to FY22 core profit increasing by 87.4% YoY.

• Growth from all segments. FY22 PBT for air and ocean freight forwarding shot up 110.7% and 381.3% YoY amid the pick-up in business activities following the broader economic reopening. This was coupled with supply chain bottlenecks that saw clients resorting to air modes, as well as elevated freight rates. The domestic business also grew 25.7% YoY to close the year with a record – thanks to increased business volumes from both existing and newly secured customers. Note: The integrated logistics services or ILS tax incentive scheme took effect at the start of this quarter, resulting in tax savings and a lower effective tax rate for the year.

• Positive throughput momentum plus new customer wins. As the broader economic reopening continues to materialise amidst a favourable GDP outlook, we continue to anticipate positive throughput volume growth for TASCO – complemented by its diverse clientele base. The persistent supply chain disruption points to an extended tightness in air and ocean freight as well as elevated freight rates, which are positives for TASCO’s international business segment. This has been made more attractive by NYK Group’s expansive global logistics network. TASCO will continue to benefit from the organic growth coming from its existing customers, with an additional boost from new business wins within the retail trading segment. Elsewhere, we look forward to the construction of a 650k sq ft warehouse under Phase 1 of the Shah Alam Logistics Centre expansion, which should allow TASCO to capture warehouse shortage opportunities.

• We raise our FY23F-24F earnings by 7% and 6.9%, taking into account higher contributions from the freight forwarding segment. We subsequently raise our TP to MYR2.03. We also introduced our FY25F earnings of MYR99m. Our TP is based on an unchanged 19x FY23F P/E (+1SD) and incorporates a 2% ESG premium. Key risks include weaker-than-expected volumes recovery and higher-than-expected opex.

Source: RHB Research - 29 Apr 2022