RHB Research raises FV for Tasco to RM3.90 on sustained earnings momentum

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KUALA LUMPUR (Septy 9): RHB Research maintained its "buy" rating on Tasco Bhd at RM3.52 with a higher fair value of RM3.90 (from RM3) following the logistics solutions provider securing new clients for its contract logistics division, upon the expansion of its warehouse.

“These are clients with high inventory turnover, which bodes well for Tasco as it may see sustained earnings momentum over the coming years,” said the research house in a note today.

It said that Tasco’s new high specs warehouse in Shah Alam is currently fully utilised.

“The earnings boost of RM12.3 million from RM4.9 million, from its contract logistics in the 1QFY15 was attributed to new clients secured, which should give a further boost to earnings over the ensuing quarters,” it said, adding that Tasco’s new clients have a high inventory turnover business model.

According to RHB Research, the company reported strong earnings growth of 74% year-on-year in the first quarter for the financial year ended 2015 (1QFY15) of RM10 million, which was above its expectations.

“1QFY15 strong numbers were partly due to one urgent shipment from one of its clients in the air freight division, and businesses from new customers in its warehousing division, which forms part of the contract logistics division,” it said.

It added that the company’s outlook remains bright as its business volume has been growing in tandem with regional economic growth, adding that that Tasco’s earnings have benefitted from the strong trade numbers in the first half of 2014.

“While we expect Malaysia’s trade growth to subside in the remaining half of 2014 given the higher base effect last year, earnings growth is expected to remain commendable over the immediate to medium term, thanks to the resilient growth in domestic demand,” it said.

The research house maintains its "buy" recommendation for Tasco with a higher fair value of RM3.90, based on 11.3 times FY15F earnings per share.

Tasco fell 2.84% or 10 sen to RM3.42 in the morning session on Tuesday.