Tasco Berhad - Misses Expectations on Weaker Freight and Domestic Sales
Fri, 02-May-2025 07:33 am
by Jayden Tan • Apex Research

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TASCO (5140)

Target Price (RM)

0.51

Recommendation

Hold

Results below expectations. Excluding a one-off expense of RM8.4m related to the demolition of a warehouse facility at Northport for preparation for the construction of a new 300k sqf modern warehouse, CNP stood at RM5.2m (headline net loss: RM3.2m). The results came below expectations, with FY25 performance accounting for only 85% of our forecast and 88% of consensus estimates. The shortfall was mainly attributed to a slower-than-expected recovery in the DBS following the loss of a key solar customer in Penang, coupled with higher-than-anticipated effective tax expenses during the quarter.

 

Dividend. Tasco has declared a dividend of 1.25 sen per share for FY25 payable at 30 May 2025.

 

YoY. 4QFY25 CNP declined by 70.8% yoy, mainly due to higher administrative expenses and weaker sales performance from both the International Business Segment (PBT -6.9%) and Domestic Business Segment (PBT -7.8%), impacted by lower freight rates and a challenging local operating environment. In addition, the absence of tax credits contributed to higher tax expenses of RM6.5m, compared to a tax income of RM2.9 mil in 4QFY24, further weighing on CNP.

 

QoQ. CNP declined by 48% qoq, primarily impacted by weaker international freight rates and higher administrative and tax expenses. The increase in operating costs was largely driven by elevated human resource expenses during the quarter.

 

Outlook. While near-term volumes from freight forwarding business may see a temporary boost from the 90-day tariff reprieve announced earlier, we remain cautious on Tasco’s outlook. We believe that short-term demand is unlikely to fully offset the broader headwinds stemming from an uncertain global trade environment driven by erratic tariff policies. In addition, easing of the Red Sea crisis may lead to decline in freight rates, placing further pressure on Tasco’s freight forwarding segment. On the domestic front, the DBS segment continues to struggle, following the loss of a key solar customer in Penang. The increasing supply of new warehouse facilities has also intensified competition, further challenging the Group’s growth prospects.

 

Earnings Revision. We have revised our FY26F CNP downward by 18% to RM57.2m, following a cut in sales assumptions for the international freight forwarding segment due to ongoing tariff policy uncertainties and geopolitical risks. Meanwhile, we introduce our FY27F CNP forecast at RM64.6m, reflecting a 13% yoy growth, driven primarily by the anticipated contribution from expanded warehouse capacity.

 

Valuation. We maintain our HOLD recommendation on Tasco, with a lower target price of RM0.51 (previously RM0.73), following the application of a reduced PER multiple of 7x (from 9x), which reflects -1 standard deviation from its three year mean PER, to reflect the uncertainties surrounding the global trade environment.

 

Risks. Prolonged geopolitical uncertainties and inflationary pressures arising from Trump tariffs may continue to suppress global demand, posing downside risks to Tasco’s performance, particularly in its international freight and logistics operations.

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