Tasco Bhd
(Aug 23, RM1.15)
Downgrade to hold with a lower target price of RM1.08: We revised Tasco Bhd’s TP from the previous RM1.71 (13 times price-earnings ratio [PER]), pegged at a lower PER of 10 times (-1 standard deviation versus its two-year mean) on a backdrop of heightened equity risks, to our forecast financial year 2020 (FY20) earnings per share of 10.8 sen.

 
The group’s revenue fell RM1.2 million (-0.7%) year-on-year (y-o-y) on lower revenue from the domestic business solutions (DBS) segment, offsetting gains in the international business solutions (IBS) segment. In the IBS segment, higher export shipments (+RM7.7 million y-o-y) of solar panels, aerospace and healthcare customers boosted revenue, but this was offset by lower shipments from capacitor and chemical customers (-RM7 million y-o-y). The DBS segment saw strong contributions from its cold supply chain (CSC) division (+RM7.5 million y-o-y), and increased haulage business (+RM4.9 million y-o-y) from electrical and electronics, as well as musical instrument customers, but was weighed down by reduced shipments and custom clearance customers, and lower trucking deliveries. Pre-tax profit fell RM3.4 million (-32.9% y-o-y) due to intense competition in the trucking and air freight forwarding business.

Revenue improved slightly, up RM1 million (0.6% quarter-on-quarter [q-o-q]) on the back of higher DBS sales. This was attributed to better performing haulage, warehouse, and in-plant businesses under the contract logistics division, and higher CSC contributions. Q-o-q, there were lower revenues for custom clearance and trucking from reduced shipments and deliveries.

Tasco has partnered with The Japan Overseas Infrastructure Investment Corp for Transport & Urban Development (JOIN). This provides Tasco with access to other markets in which the Japanese government fund has a presence (handling products imported from Japan), as well as sharing of knowledge or expertise which would contribute to the business of Tasco’s cold supply chain unit, Tasco Yusen Gold Cold Sdn Bhd (TYGC). JOIN has taken up a 30% stake in TYGC for a cash consideration of RM125mil. JOIN is a government fund 87.19% owned by the Japan ministry of finance, with the remainder held by various Japanese corporations. — Inter-Pacific Research, Aug 23