MIDF Research maintains 'neutral' on Tasco, cuts TP to 73 sen on expected higher competition

TheEdge Wed, Mar 25, 2020 12:30pm - 4 years View Original


KUALA LUMPUR (March 25): MIDF Research has maintained “neutral” on Tasco Bhd but cut its target price to 73 sen from RM1.10 previously as competition among logistics firms is expected to heat up once factories in China and around the world resume their full operations, which will be partially offset by lower fuel prices.

In a note today, the air freight forwarding segment saw its revenue and profit before tax (PBT) declined by 15% year-on-year (y-o-y) and 40% y-o-y respectively due to lower export shipments of capacitors and chemical customers in the first nine months of its financial year ending March 31, 2020.

“Tasco’s strategic partnership with AirAsia Group Bhd will also be affected as the airline saw a 2.3% y-o-y drop in the number of flights for February 2020 amidst capacity cuts especially to North Asia,” said the research house.

It said the Movement Control Order (MCO) imposed by the government will lead to lower fuel consumption among consumers, indirectly impacting footfalls at petrol stations.

“We expect revenue for the joint venture between Yee Lee Corp Bhd and Tasco to be affected from the MCO via the contract with Shell Malaysia Trading Sdn Bhd to provide supply chain services for Shell convenience retail outlets in Peninsular Malaysia.

“We are revising our earnings estimates for FY20, FY21 and FY22 to RM10.7 million (previously RM11 million), RM14.3 million (previously RM14.6 million) and RM16.3 million (previously from RM16.5 million) respectively,” it said.

The research house expects manufacturing and production activity in China to gradually recover in the second half of 2020 provided that the fears of Covid-19 have subsided.

“Meanwhile, the lower diesel pump prices could help Tasco in managing its fuel cost structure which makes up 3 to 4% of Tasco’s operating expense. All things considered, we are maintaining our 'Neutral' stance on Tasco,” it said.

At 12.02pm, shares in Tasco fell two sen or 2.6% to 75 sen, with 11,500 shares traded, giving it a market capitalisation of RM154 million.

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