Stock Name: TASCO
Company Name: TASCO BERHAD
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
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