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Friday, November 15, 2013

Tasco - Recovery Is Seen


TASCO’s 9MCY13 was in line with our expectations. Recovery is seen in its  3Q  numbers,  but  a weak  1H  has  dragged  on  its  YTD  performance. Most of its business divisions reported earnings growth in 3Q,  except for  the  trucking  division.  Thus,  we  are  keeping  our  earnings  forecast unchanged  at  this  juncture  and  retain  our  BUY  recommendation  and MYR2.30 FV on this stock.
  • 3QCY13  improved  as  expected.  TASCO  reported  a  healthy  set  of results  in  3QCY13  after  struggling  for  two  consecutive  quarters. Revenue grew  13.2% q-o-q to MYR118.1m from MYR104.3m, while  net profit improved 20.8% q-o-q to MYR6.9m from MYR5.7m.  Nonetheless, due to a  weak start for its 1H, TASCO’s 9MCY13  cumulative earnings were 19.1% lower y-o-y. Having said that,  its  9MCY13 earnings were in line  with  our  expectations,  as  we  had  earlier  incorporated  lower  net profits in tandem with the challenging business environment .
  • Operations  overview.  In  3QCY13,  TASCO’s  business  divisions generally reported improvements in revenue and earnings, particularly its contract  logistics  division,  which  reported  revenue  and  pre-tax  profit growth  of  30%  and  68%  q-o-q  respectively.  This  was  attributed  to  an increase  in  the  customs  clearance,  haulage  and  warehouse  business. However,  this  was  offset  by  its  trucking  division,  which  recorded  a revenue  drop  of  MYR0.9m  (-4.4%  q-o-q)  and  pre-tax  loss  of  0.7m  on higher fuel costs and minimum wage.
  • Risks. Prolonged sluggishness in the economy and weak exports could further  dampen  TASCO’s  performance.  The  group  also  has  greater exposure to the export market,  where a sustainable recovery has yet to be seen. All these can be a potential risk to our earnings forecast.
  • Maintain  BUY,  FV  MYR2.30.  We  are  positive  that  TASCO  is  able  to meet our CY13 full-year earnings forecast and we also believe that  the macroeconomic  outlook  may  turn  brighter  in  2014.  Hence,  we  are keeping our earnings forecasts unchanged at this juncture and maintain our BUY  call on  TASCO,  with  its MYR2.30  FV  –  pegged to 8x CY14F P/E, which is its historical P/E – retained.  
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Tasco Malaysia (TASCO) is a leading third-party logistics provider.
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Source: RHB

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