KUALA LUMPUR (Feb 23): MIDF Research upgraded Tiong Nam Logistics Holdings Bhd to "buy" at 83 sen with a higher target price of 93 sen (from 56 sen) and said the robust performance of the group's logistics segment will be sustainable.

“We opine that the logistics and warehousing segment of Tiong Nam will not only cushion the losses from the property and hotel segments but also assist in boosting earnings going forward,” it said, adding that this will turn the tide for the group's financial performances in the future as Tiong Nam graduated from a string of financial losses to projecting earnings growth.

In a note today, the research house highlighted that Tiong Nam’s 3QFY21 profit after tax and minority interests (PATAMI) was at RM6.4 million, which is up 74% quarter-on-quarter (q-o-q) and up 260% year-on-year (y-o-y).

Cumulatively, for 9MFY21, PATAMI stood at RM4.6 million (-9% y-o-y) whereby the revenue was down 7% y-o-y and core PATAMI was recorded to the tune of -RM1.0 million (-133% y-o-y), which came in -240% and -201% below MIDF's and consensus expectations.

In terms of the logistics and warehousing segment for 9MFY21, it recorded growth in profit before tax (PBT) at RM30.6 million (+59% y-o-y).

Meanwhile, the property development segment recorded loss before tax (LBT) of RM11.4 million (-919% y-o-y) and the hotel and dormitory segment recorded LBT of RM15.2 million (-39% y-o-y) for the same period.

Moving forward to 4QFY21, the research house anticipates Tiong Nam’s earnings will continue to be supported by logistics and warehousing despite the underperformance of the property and hotel segments.

“We further postulate that the earnings from logistics in 4QFY21 will bring back the group to profitability, outweighing the losses of other divisions,” it added.

Therefore, the research house increased its top line estimate for FY21E/22F to RM588.6/RM614.4 million, or +4.0%/+2.8% revision, to account for higher revenue expectation for the Tiong Nam.

“This impacts our earnings estimate for FY21E/FY22F from RM1.5 million/2.3 million to RM4.7/RM5.0 million as the quarter's result highlight the resiliency of the group’s earnings.

“We remain upbeat on the long-term potential of Tiong Nam as it is one of the biggest logistic players in Malaysia with notable regional presence in comparison to its peers,” it added, stating that it is a boon to its shareholders.

At 9.52am, Tiong Nam rose 1.21% or one sen to 84 sen, valuing it at RM443.37 million.