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03 February 2023. Friday
KUALA LUMPUR (Feb 3): The performance of total logistics solutions provider Tasco Bhd continues to be resilient as freight rates further normalise, analysts said after the group’s net profit for the third quarter ended Dec 31, 2022 (3QFY2023) more than doubled to RM20.44 million from RM8.81 million a year ago.
Analysts expressed caution for weaker-than-expected volume recovery and higher-than-expected operating costs as inflationary pressures persist, but have confidence in Tasco’s diversified segments.
Tasco has an international business solutions (IBS) segment, which includes services of air freight forwarding, ocean freight forwarding and supply chain solutions. The group also has a domestic business solutions (DBS) segment, which has contract logistics, cold supply chain and trucking services.
“The group has proven its earnings resiliency despite the normalising market freight rates due to the compensating upswing from its shipment volume,” MIDF Amanah Investment Bank Bhd said in its research note.
Tasco’s quarterly revenue decreased 13.71% to RM392.69 million from RM455.09 million in 3QFY2022, mainly because revenue from the IBS segment declined to RM184.9 million from RM294.4 million as freight rates in the market declined. However, this was partially offset by an increase in revenue from the DBS segment to RM207.8 million from RM160.7 million.
MIDF noted that Tasco’s contract logistics division’s revenue was up 43.4% year-on-year (y-o-y) due to stronger volume for its custom clearance and warehousing segments. The firm revised upwards its earnings for Tasco’s FY2023 to FY2025 by 7.5% to 8% to account for the higher contributions from the contract logistics division.
Post-adjustments, MIDF derived a higher target price (TP) for Tasco at RM1.87 from RM1.75 previously and maintained its “buy” call.
RHB Investment Bank Bhd said within the contract logistics division, Tasco’s haulage business still lagged (down 16.5% y-o-y) due to delivery order reductions by major electrical and electronics customers and fleet operating costs.
“Nevertheless, the haulage and customs clearance businesses’ profit before tax drop was well cushioned by the warehouse wing (+15% y-o-y) within the same division,” RHB Investment said.
“We continued to look forward to major business wins this year and the 620,000 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 the first half of 2024.”
RHB Investment kept its “buy” call with unchanged TP of RM1.75 and retained its earnings estimates. Based on the firm’s chart, it predicted recurring net profits of RM93 million for Tasco’s FY2023, RM99 million for FY2024 and RM109 million for FY2025.
Noting that the weaker performance in Tasco’s IBS segment was dragged down by the US and Russian markets in both air freight forwarding and ocean freight forwarding businesses, the research department of Apex Securities Bhd believes the rates will further trend down in the coming period, underpinned by the backdrop of inflationary pressure and an interest rate upcycle.
Apex Securities analyst Jayden Tan Kean Dick also warned that Tasco’s margin may be impacted by the weakening of the US dollar as the group bills its freight customers in US dollar.
“Hence, we expect revenue and profit margins to be negatively affected by the weakening of the USD in the next quarter,” Tan said.
Tan retained Tasco’s FY2023 net profit forecast at RM85.5 million, which is a 29.8% y-o-y growth, but kept FY2024 net earnings forecast unchanged at RM66.4 million, which is a 21.7% y-o-y decline, with an anticipated economic slowdown.
Apex Securities maintained a “hold” recommendation on Tasco with an unchanged TP of 91 sen.
At noon break, Tasco was trading 2.5 sen higher at 92.5 sen, valuing the group at RM736.02 million.
Read also:Tasco’s 3Q net profit more than doubles to RM20 mil
