Tasco Berhad - Performance within expectations
Thu, 07-Nov-2024 01:54 pm
by Jayden Tan • Apex Research

Counter

TASCO (5140)

Target Price (RM)

1.00

Recommendation

Buy

Summary

  • Tasco’s 2QFY25 core net profit at RM11.7m came in line with our expectations, making up to 46% of our full-year projection and 45% of consensus estimate.

  • Looking ahead, we expect a stronger 2H25 performance driven by seasonally higher volumes and stabilising forex.

  • Maintain our BUY recommendation with unchanged target price of RM1.00 by pegging PE multiple of 11.0x to FY26F EPS of 9.1 sen.

 

Results Review

  • Results review. In 2QFY25, core net profit declined by 25.9% yoy to RM11.7m but rose by 10.6% qoq after excluding one-off expenses of RM3.6m related to the demolition of an old warehouse. The yoy decline was primarily due to higher costs, including a forex loss of RM6.5m from MYR appreciation. In contrast, the qoq growth was driven by increased volumes and improved margins in the International Business Solutions (IBS) segment, supported by contract price adjustments to match rising freight rates. 

  • Within expectations. 1HFY25 results came within our expectations, with core net profit representing 46% of our full-year projection and 45% of the consensus estimate. We anticipate a seasonally stronger 2H to meet full-year target.

  • Operations Highlights. IBS pre-tax profit surged by 72.9% yoy and 107.1% qoq, to RM2.5m driven by increased volumes and higher freight rates, as well as improved contract pricing, which supported better margins. Additionally, disruptions from US East Coast port strikes and congestion contributed to the segment's strong performance. Meanwhile, the Domestic Business Solutions (DBS) segment remained subdued, posting a 12.8% qoq improvement, but a 18.7% yoy decline in PBT to RM13.1m.

  • Industry Highlights. Despite the recovery in trade activities and the E&E sector, the industry continues to face a challenging environment characterized by global geopolitical tensions, volatile freight rates and uncertainties of global economic.

  • Outlook. While we expect a stronger 2H25 performance driven by seasonally higher volumes and stabilising forex, short-term caution remains amid ongoing geopolitical tensions, volatile freight rates, and an uncertain global economic outlook. For longer-term perspective, we are optimistic over the Group’s warehouse capacity expansion, which is likely to create synergies across all business segments. 

  • Valuation. No changes to our earnings forecast given that reported figures came within expectations. Maintained our BUY recommendation, with an unchanged target price of RM1.00.

  • Risk. The DBS segment may face headwinds from inflationary pressures, which could dampen economic demand, further impacted by certain measures introduced in Budget 2025.
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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

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