Tasco Bhd
(Aug 11, RM1.55)
Maintain buy at RM1.50 with fair value of RM2.10: Tasco's 1HFY11 top and bottom lines came in at RM226 million and RM13.5 million. Year-to-date (YTD) earnings climbed 25% and pre-tax profit 37%, accounting for about 48% of our FY11 forecast, which is in line with our recently upgraded forecasts despite the currently tepid global economic conditions.

YTD top and bottom line rose 11.3% and 25% although quarter-on-quarter (q-o-q) the top line was down 9%. The group managed to achieve 9% earnings growth and 8% growth in its pre-tax profit on high forwarding volume'' and trucking. Management also said there was high volume at its auto CBU division , spurred by shipments of the Honda Insight.

The group's pre-tax profit margin for international business solutions continued to narrow due to competition in sea and air freight rates and a weakening US dollar. Nonetheless, overall YTD pre-tax profit margin widened by 19.8% to RM17.9 million against the same period last year.

YTD revenue from the domestic business solutions side expanded 20% while that for its international business solutions was flat, no thanks to the weakening US dollar.

Its recently launched 197,000 sq ft warehouse in Bangi catering'' for Tier-1 client Sony and its upcoming 160,000 sq ft warehouse in Shah Alam, scheduled to launch by end-November to serve Panasonic, will enable Tasco to expand its 3PL and warehousing division aggressively. With the group's efforts to expand its non-Japanese client base, we are bullish on its forwarding and 3PL division.

Coming off its strongest 1Q results ever, Tasco will continue to see growth as it secures new clients for its contract logistics segment and expansion in its domestic warehousing and forwarding divisions. Management has guided for a sharp recovery in the coming quarter (June to August), especially in the shipment of replacement parts. The air freight division, which fetches high margins owing to the urgent nature of shipments, is likely to be the coming quarter's key performer due to the big shipments of cigarettes to Japan. Maintain 'buy', with a fair value of RM2.10 based on a price-earnings ratio of seven times mid-FY11/FY12 earnings per share. ' OSK Research, Aug 11


This article appeared in The Edge Financial Daily, August 12, 2011.