• Maintain BUY, new MYR1.15 TP from MYR1.19, 38% upside with c.4% FY24F (Mar) yield. While 4QFY24 showed sequential bottomline recovery, FY24 earnings were still slightly below expectations. We remain upbeat for FY25 and beyond, given: i) Trade activity recoveries, ii) regional business projects, iii) contributions from new warehouses, and iv) higher tax savings credits. TASCO also declared a final dividend of 2.35 sen/share.

• 4QFY24 revenue and net profit stood at MYR268.5m (-3.2% QoQ, +0.7% YoY) and MYR17.9m (+29.2% QoQ, -18.4% YoY). The sequential improvement and narrowing YoY loss shown in 4QFY24 were within our expectations, thanks to improving margins in the international business solutions (IBS) segment and tax credit allowances the lowered the effective FY24 tax rate to 12% from 24%. FY24 core earnings fell 32% YoY to MYR61.7m, which were slightly below expectations at 95% of our and Street’s full-year estimates.

• IBS. 4QFY24 revenue of MYR109.8m fell 6.4% QoQ (-13.7% YoY), mainly dragged by the weaker air freight forwarding (AFF) division on lower contributions from automotive and aerospace customers. Conversely, the ocean freight forwarding wing’s (OFF) revenue of MYR31.5m improved by 33.1% QoQ (-3.3% YoY). Both AFF and OFF units posted higher operating margins on better spreads (lower buy rates and higher fixed selling prices).

• Domestic business solutions (DBS). 4QFY24 revenue and PBT stood at MYR165.7m (-9.7% QoQ, +12.2% YoY) and MYR11.2m (-35.5% QoQ, -4.8% YoY). The sequential weaker quarters were dragged by the cold supply chain (CSC) and contract logistics (CL) segments, particularly warehousing – likely due to start-up expenses from incoming new warehouses. Within CL, customs clearance PBT fell 35.2% due to a drop in shipments from solar panel customers. While CSC revenue and PBT showed YoY improvements, the QoQ weakness was mainly due to a loss of convenience store chain customer.

• Earnings revision. We trim FY25F-26F earnings slightly by 6% and 6.5% following the revision on IBS and DBS operating margins. Still, recovery signs shown in 4QFY24 are promising, and we do expect TASCO’s future prospects to be supported by: i) Contributions from new higher-margin warehouses, ii) further tax savings credits, and iii) additional pick-ups in trade activities within the intra-Asia region. As a result, our TP is now MYR 1.15, pegged to an unchanged 12x FY25F P/E after incorporating a 2% ESG premium. The group’s current valuation is still attractive for a leading integrated logistics player with diversified business segments, solid cash flow generation, healthy dividend yields, and growth prospects. Key risks include loss of key customers and a decline in operating margins.

Source: RHB Research - 2 May 2024