KUALA LUMPUR (Sept 11): MIDF Research maintained its "neutral" stance on Tasco Bhd with a higher target price (TP) of RM1.32, from 80 sen, after the group received approval of the Malaysian Investment Development Authority (MIDA) for the second round of tax incentives to carry out Integrated Logistics Services (ILS) activities.

“Our target price is derived by pegging our FY21 EPS (earnings per share forecast for the financial year ending March 31, 2021) at a revised forward PER (price-earnings ratio) of 15 times, which is 1SD (one standard deviation) above its two-year mean at pre-Covid-19 levels,” said MIDF in a note today.

Following that, MIDF also revised its EPS forecasts for the group for FY21-22 to 8.80-9.75 sen from its previous forecasts of 7.30-8.30 sen.

“A key risk to our estimates is lower-than-expected earnings impact from the tax incentive as we wait for more communications from management on capex (capital expenditure) decisions, investment financing and strategic directions, among others,” it said.

It noted that Tasco's share price spiked up to RM1.45 yesterday prior to the announcement of the tax incentive, saying that was significantly higher than its trading range of 80 sen to RM1 during the last few weeks.

“The increase translated into price appreciation of about 45-81%. Recall that its share price was in a steady decline from its peak of RM2.60 in May 2017 to its lowest point at 65 sen during the peak MCO (movement control order) period back in April 2020,” said MIDF.

Moreover, MIDF said it anticipates both the demand and supply sides of the economy to witness protracted weakness and demand to take longer to recover to pre-Covid levels, and this will in turn impact logistics players such as Tasco.

“Furthermore, we believe that its share price at the current level is not sustainable as it is trading beyond 1SD away from its forward PER mean (19 times versus 13 times) as the company remains impacted by ongoing Covid-19 developments.

“In addition, the recent upward movement in its share price has also resulted in limited price appreciation going forward given that all the positives have been priced in at this juncture. All things considered, we maintain our ‘neutral’ stance on Tasco,” it said.

At 11.22am, shares in Tasco were three sen or 2.07% higher at RM1.48, with a market value of RM298 million.