TASCO MK, (Maintain BUY, FV RM2.48, Last Close, RM2.11)

Stock Name: TASCO
Company Name: TASCO BERHAD

Research House: OSK

Price Call: BUY

Target Price: 2.48

On Tuesday, we attended the briefing by TASCO as part of theInvestor Relations Day co-organized by Malaysia Investor Relations Associationand ZJ Advisory. The briefing reaffirmed our view of  TASCO as  the top pick in  our Logistics universe for its:  (i)healthy growth in its sea and air freight business, (ii) expanding 3rd PartyLogistics volume  from its existingclients, and (iii) low PER, at 6x FY12 EPS vs the industry average of 7x. Wekeep our BUY call, but upgrade our FV from RM2.33 to RM2.48, pegging the stockat a slightly higher PER of 7x, which is in line with the industry average PER,from 6.5x previously.

Volume growth to staystrong. In tandem with the global economic recovery, and the receding riskof a double-dip global recession, we gather that domestic trade activities as wellas in that in the Asian region  areimproving. As can be seen in Figures 2 and 3, exports to Japan, Asean and USimproved by 25%, 20% and 9% y-o-y respectively. Leveraging on its Japanesemajor shareholder, NYK Group's global logistic network and expertise, wecontinue to like TASCO, which is well-positioned to ride on the revenue growth, boosted by increasingshipments  and the provision of totallogistics solutions. We also expect its  shipments of LCD and  plasma TV to pick up strongly in 2HFY12 owingto the upcoming 2012 Olympics and Euro 2012. Note that  in 2010, TASCO's earnings  soared  134% to RM23.4m  on the back of  urgent air freight shipments of TV setsduring the World Cup in South Africa. Elsewhere, we are positive on the group's auto CBU division, whichprovides  Auto Pre-Delivery Inspection(Auto PDI) to Honda, Ford, VW and Volvo. Although this division's earnings  contribution to thegroup is still relatively small, we are optimistic that it will flourish shouldHonda's plans to localize and expand its production in Malaysia materialize.

3PL still  the main growth engine. We think thesteady expansion of production by its existing clients, mainly MNCs in the fastmoving-consumer good business and E&E products with strong brand names,will ensure the group continues to record healthy growth in its high-margintotal logistics division. Total logistics involve the provision of comprehensivesolutions encompassing warehousing services as well as air, sea and landfreight services. We also gather from management that it saw some urgentcontract logistics shipments of E&E and FMCG products in 1Q, particularlyfrom Feb-Mar. Hence, as we believe the group will continue to register bettery-o-y numbers, we are optimistic on its upcoming 1Q results due to be announcedon 3 May.

Source: OSK188

TASCO (TASCO MK, BUY, FV: RM2.33, Close: RM2.01)

Stock Name: TASCO
Company Name: TASCO BERHAD

Research House: OSK

Price Call: BUY

Target Price: 2.33

Since we picked TASCO as our top buy among small caplogistics stocks under our coverage on 18 Oct 2011,  its share price has surged  by  some 38%  to  its all-time intra-day high of RM2.05yesterday. As macroeconomic conditions seem more being now coupled with theresilience of its 3rd party logistics (3PL) business, we are  raising revenue forecasts for this segment,as well as  volume growth for TASCO's seaand air freight business. We are tweaking up our revenue and earnings forecastsby 7% for FY12 and 4%-8% for FY13 respectively, after which our FV goes upto  RM2.33 (previously RM2.18), based onan unchanged 6.5x FY12  PER. We maintaina BUY on TASCO, for its low PE of 4.2x vs the industry average PE of 7x.

Volume expands on bettermacroeconomic outlook. As the macroeconomic outlook turns more positive,TASCO has benefited from the pick-up in trade activities, especially in Asiaand Japan, as well as on the domestic front. Recall that the group posted strong earnings growth of 38% in FY11 onthe back of resilient volume handled. The outlook for trade activities isimproving, judging from the latest data from Malaysia's Department of Statistics, which showed  that Malaysia's Jan 2012 exports to Japan,Asean and US improved by 26.6%, 1.2% and 1.1% y-o-y respectively. Leveraging onits Japanese major shareholder NYK Group's global logistic network andexpertise, we think TASCO will continue to display resilient growth, bolsteredby its aggressive sales and marketing efforts in promoting its total logisticsservices to MNCs. We also gather from management that it saw some urgentshipments of E&E and FMCG products in 1Q, particularly from Feb-Mar. Inaddition, we believe the upcoming major sport events like the 2012 Olympics andEuro 2012 will help boost  the  shipment of LCD and  plasma TVs via its sea and air freight services.  These developments  prompt us to nudge  up our volume assumptionsfor  the company's sea freight by 4% to168,000 TEUs and air freight by 3% to 18,000 tonnes for FY12.

3PL leads the way.We expect the group's 3PL business, providing comprehensive solutionsencompassing warehousing, air, sea and land freight services, to continue to bethe key growth driver. We gather that the group has minimal exposure to US andEurope, which helps fuel our optimism on the company. Besides, the group isshipping mainly consumer products with strong branding whose demand is fairlyinelastic. With  a growing clientele andthe fact that almost 96% of its current warehouse space is taken up, TASCO announcedto Bursa yesterday that it had entered into a sale and purchase agreement with PortTanjung Pelepas SB to buy 5 acres of land in PTP for RM5.5m cash. As thecompany is utilizing  internallygenerated funds, the land purchase  willnot  greatly affect  its net gearing given that this is withinour  capex  projection. In view of the healthy expansionof the  3PL  segment and the  growing demand among MNCsto outsource their logistics requirements, we are bumping up our  3PL  revenue forecast by 5% and 7%  for FY12-13 respectively. 

Source: OSK188 

Healthy earnings growth for Tasco

Stock Name: TASCO
Company Name: TASCO BERHAD

Research House: OSK

Price Call: BUY

Target Price: 2.10

Tasco Bhd
(Aug 11, RM1.55)
Maintain buy at RM1.50 with fair value of RM2.10: Tasco's 1HFY11 top and bottom lines came in at RM226 million and RM13.5 million. Year-to-date (YTD) earnings climbed 25% and pre-tax profit 37%, accounting for about 48% of our FY11 forecast, which is in line with our recently upgraded forecasts despite the currently tepid global economic conditions.

YTD top and bottom line rose 11.3% and 25% although quarter-on-quarter (q-o-q) the top line was down 9%. The group managed to achieve 9% earnings growth and 8% growth in its pre-tax profit on high forwarding volume'' and trucking. Management also said there was high volume at its auto CBU division , spurred by shipments of the Honda Insight.

The group's pre-tax profit margin for international business solutions continued to narrow due to competition in sea and air freight rates and a weakening US dollar. Nonetheless, overall YTD pre-tax profit margin widened by 19.8% to RM17.9 million against the same period last year.

YTD revenue from the domestic business solutions side expanded 20% while that for its international business solutions was flat, no thanks to the weakening US dollar.

Its recently launched 197,000 sq ft warehouse in Bangi catering'' for Tier-1 client Sony and its upcoming 160,000 sq ft warehouse in Shah Alam, scheduled to launch by end-November to serve Panasonic, will enable Tasco to expand its 3PL and warehousing division aggressively. With the group's efforts to expand its non-Japanese client base, we are bullish on its forwarding and 3PL division.

Coming off its strongest 1Q results ever, Tasco will continue to see growth as it secures new clients for its contract logistics segment and expansion in its domestic warehousing and forwarding divisions. Management has guided for a sharp recovery in the coming quarter (June to August), especially in the shipment of replacement parts. The air freight division, which fetches high margins owing to the urgent nature of shipments, is likely to be the coming quarter's key performer due to the big shipments of cigarettes to Japan. Maintain 'buy', with a fair value of RM2.10 based on a price-earnings ratio of seven times mid-FY11/FY12 earnings per share. ' OSK Research, Aug 11


This article appeared in The Edge Financial Daily, August 12, 2011.

OSK positive of Tasco's international business

Stock Name: TASCO
Company Name: TASCO BERHAD

Research House: OSK

Price Call: BUY

Target Price: 1.93

OSK Research, positive of Tasco Bhd's international business, is expected to see high volume growth hence giving the management greater bargaining power on rates, vis-'-vis, shipping lines and airlines.

Tasco, a leading third party logistics provider, was optimistic its trucking and auto completely built-up division will perform well supported by the robust domestic economy and strong demand for the Honda Insight, it said in a research note today.

"Although fuel price has escalated, TASCO has been able to transfer the higher cost to its customers within three months as it can adjust its fuel cost under the Association of Malaysian Hauler's Fuel Adjustment Sector Formula," it added.

The research house maintained a "buy" call on TASCO with an unchanged fair value of RM1.93 based on seven times the financial year 2011 earnings per share. -- BERNAMA