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Keep BUY and MYR1.75 TP, 95% upside and 4% yield. 9MFY23 (Mar)’s results beat Street’s estimates on TASCO’s diversified segments – this was further supported by higher volumes despite down-trending freight rates. We continue to like the group, given its solid business fundamentals and diverse clientele, which will continue to sustain its commendable earnings performance in our view. The stock’s below-peer valuation of 7.7x presents a compelling investment proposition into the country’s leading integrated logistics player with consistent earnings delivery.
Exceeding Street estimates once again. 3QFY23 core earnings of MYR20.4m (-15.3% QoQ, -17.4% YoY) took 9MFY23 numbers to MYR69m. This came within our full-year estimates but beat consensus at 74% and 87%. Despite the weaker topline, the operational profit would have been on par YoY and QoQ if the unrealised FX loss of MYR4.5m was stripped out – thanks to margins improvement on cost-pass-through exercises and a strategy to focus on better-margin businesses.
Still holding up well. Despite the normalisation of freight rates as expected, 9MFY23 PBT for both the international and domestic business segments (IBS and DBS) continued to be lifted by 31.1% and 8.7% YoY, underpinned by strong shipment volumes. Within the contract logistics (CL) division, we note that the haulage business still lagged (-16.5% YoY) due to delivery order reductions by major electrical & electronics customers and fleet operating costs. Nevertheless, the haulage and customs clearance businesses’ PBT drop was well cushioned by the warehouse wing (+15% YoY) within the same division.
Promising outlook. TASCO has once again proven its resilience and strength as a total logistics solutions provider. This diversifies its business risks and shelters the group from the freight business’ unfavourable environment. As much as unfavourable freight rates are a major concern, we believe the rate has stabilised, and positive total trade and GDP outlook locally should led to positive throughput volume growth in the near term. We continued to look forward to major business wins this year and the 620k sq ft Shah Alam Logistics Centre’s expansion, which will – in our view – allow TASCO to capture the warehouse shortage opportunity at superior yields (low land cost) in 1HCY24.
Maintain BUY. We retain our earnings estimates as results were in line. Our TP, which incorporates a 2% ESG premium, is pegged to an unchanged 15x FY23F P/E – in line with the historical mean. We continue to like TASCO’s operational excellence and management’s strategies in continuing to deliver commendable sustainable performances – defying investor expectations of an earnings contraction amid down-trending freight rates and uncertainties within the global economy.
Key risks to our call include weaker-than-expected volumes recovery, loss of key customers, and higher-than-expected opex.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....