This article first appeared in The Edge Financial Daily on November 20, 2017

Tasco Bhd
(Nov 17, RM2.37)
Maintain buy with a lower target price of RM2.68: Tasco Bhd recorded a second quarter of financial year 2018 (2QFY18) core profit after tax and minority interests (Patmi) of RM9.2 million (+13.7% year-on-year [y-o-y]), bringing its cumulative first half (1H) of FY18 core Patmi to RM16.2 million (+14.6% y-o-y). This fell short of our and consensus estimates, representing 33% and 37% of the full-year forecasts respectively. The deviation is attributed to higher-than-expected costs and lower contributions from acquisitions, where the synergistic financial impact will only be felt in FY19. This is later than our earlier estimate, as we had forecast the acquisitions to conclude by 1H of calendar year 2017/1QFY18.

The top line of the international segment grew 18.3% y-o-y in 2QFY17. Tasco’s air and sea freight forwarding revenue grew +11.9% y-o-y and +27.9% y-o-y respectively, underpinned by higher export volume which climbed 7.9% y-o-y in September, the highest on record. On a micro level, Tasco’s newly acquired office equipment, lighting, musical instrument manufacturing and aerospace clientele translated into an increase in shipment volumes.

Domestic-segment revenue rose by 36.6% y-o-y as contribution of its cold chain logistics division has kicked in, which resulted in RM18.3 million post-acquisition revenue. Aside from that, the commissioning of the regional distribution centre for Renesas boosted revenue for the contract logistics division. Both of these subsegments served as a cushion for the loss before tax incurred in the trucking division due to the increase in fuel prices combined with an imbalance of trips. — MIDF Research, Nov 17