Tasco Berhad - Sluggish DBS segment performance
Fri, 21-Feb-2025 07:20 am
by Jayden Tan • Apex Research

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TASCO (5140)

Target Price (RM)

0.730

Recommendation

Hold

Summary

  • Tasco’s 3QFY25 CNP recorded at RM10.0m after excluding forex impact has declined -27.5% yoy and -28.6% qoq, bringing 9MFY25 CNP to RM34.7m (-21.0% yoy), came slightly below expectations at 72%/67% of ours/consensus forecast, mainly due to weaker-than-expected DBS sales following a solar panel customer's plant closure.

  • Tweaking FY25F/FY26F CNP lower by -3%/-11% to reflect weaker-than-expected 3Q results and expectation of thinner IBS margins amid global trade uncertainties and potential ocean freight rate declines.

  • Downgrade to HOLD with a lower TP of RM0.73 (from RM1.00) after adjusting PER to 9x (from 11x) to reflect near-term challenges in freight forwarding and DBS segment headwinds.

 

Results slightly below expectations. After excluding RM4.2m forex impact in this quarter, 9MFY25 core net profit came in at RM34.7m (-21.0% yoy), slightly missed expectations as it accounts to 72% of our estimate at RM48.5m and 67% of the consensus projection of RM51.6m. The shortfall primarily stemmed from weaker-than-expected sales in the Domestic Business Segment (DBS), caused by the closure of a solar panel customer’s production plant.

 

YoY. 3QFY25 core net profit decreased by 27.5% yoy to RM10.0m, mainly due to weaker performance in the DBS segment, where PBT dropped 36.6% yoy. In contrast, the International Business Segment (IBS) saw PBT grew 48.7% yoy, supported by stronger sales from its ocean freight forwarding business. Overall, quarterly revenue declined by 12.3% yoy to RM243.5m.

 

QoQ. Core net profit declined by 28.6% qoq, dragged by lower sales in both the DBS (-17% qoq) and IBS (-18.5% qoq) segments. This was likely due to customers frontloading in the previous quarter in anticipation of US tariffs.

 

Outlook. We turn more cautious over Tasco’s near-term outlook after the DBS segment missed expectations this quarter, compounded by uncertainties in global trade. Overcapacity in the ocean fleet and the potential easing of the Red Sea crisis could drive freight rates down, placing additional pressure on Tasco’s freight forwarding business.

 

Earnings Revision. We have tweaked our FY25F CNP lower by 3% to RM46.8m, reflecting weaker-than-expected 3Q results. For FY26F, we lowered our earnings forecast by 11% to RM64.8m to account for thinner margins in the IBS segment.

 

Valuation. We downgrade Tasco to a HOLD recommendation with a target price of RM0.73 (previously RM1.00), after applying a lower PER multiple of 9x (from 11x), which is -0.5 stdv relative to its three-year mean, alongside our reduced earnings forecast.

 

Risk. Forex fluctuations could dampen both earnings and customer sales. DBS segment may encounter headwinds from inflationary pressures and weaker economic growth.

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