Results Update 17 August 2018 Tasco Berhad

Transcription

1 JF APEX SECURITIES BERHAD (47680-X) Results Update 17 August 2018 Tasco Berhad A slow start for FY19 BUY Target price: RM1.96 KLCI points Share Price RM1.72 Target Price RM1.96 Expected share price return 14.2% Expected dividend return 3.2% Expected total return 17.4% Stock Data Bursa / Bloomberg code 5140 / TASCO MK Market / Board Main / Industrial Issued shares (m) Market cap RM344.00m Par value RM week price Range RM Beta (against KLCI) m Average Daily Volume 0.02m 3-m Average Daily Value^ RM0.04m Share Performance 1m 3m 12m Absolute (%) Relative (%-pts) Major Shareholders % Real Fortune Portfolio Sdn Bhd 9.83 Nippon Yusen KK Group CIMB-Principal Asset Mgmt Bhd 3.15 Estimated Free Float Source: Bloomberg Low Zy Jing , ext. 754 zjlow@jfapex.com.my This report is also accessible at Results Comments Tasco Bhd (TASCO) reported a net profit of RM5.2m in 1QFY19 which inched up 1.3% qoq but slid 27.3% yoy with revenue growth of 7.2% qoq and 15.7% yoy. Better QoQ performance was a result of better International Business Solutions (IBS) and lower corporate costs that offset lacklustre earnings in Domestic Business Solutions (DBS). However, unfavourable YoY performance was bogged down by lower earnings in IBS and higher corporate costs despite a better performance in DBS. Below expectations. 3MFY19 s net profit below ours and consensus expectation by matching 13.6% and 13.1% of full year earnings estimates respectively. The uninspiring performance was mainly due to a loss in Ocean Freight Forwarding (OFF) division and occurrence of pre-operating expenses for newly secured consumer retailing business under Contract Logistics (CL) Division. OFF division suffered lower revenue and made a loss in 1QFY19. Meanwhile, Air Freight forwarding (AFF) division recorded better performance in view of higher margin. Overall, 1QFY19 IBS s PBT up 20.1% qoq but down 56.5% yoy to RM1.7m. Lower revenue in OFF was due to shipments dropped in Electronic & Electrical customers. Contract logistics division s revenue continued growth but PBT bogged down by occurrence of pre-operating expenses in 1QFY19. Revenue growth 15.8% qoq and 26.3% yoy to RM79.8m but PBT tumbled 54.2% qoq and 26.3% yoy to RM5.1m. Cold Supply Chain (CSC) division posted a steady performance. CSC recorded revenue of RM21.2m, which inched down 3.5% qoq in 1QFY19. Similarly, PBT edged down 4.2% qoq to RM3.1m. Cost-down measures bear fruit in Trucking division. Trucking division registered PBT of RM0.7m in 1QFY19 as compared to RM0.4m in last quarter (4QFY18) and a loss of RM0.7m in 1QFY18. This was attributable to continuous costcutting measures taken by Tasco. As such, DBS posted a higher revenue of RM121.5m (+11.7% qoq and 41.3% yoy) with a PBT of RM8.9m (-39.6% qoq and +43.6% yoy). Please read carefully the important disclosures at end of this publication

2 CSC business to be fully recognised in FY19. Looking forward, we envisage Tasco to fully recognise its CSC business segment in FY19 with an estimated revenue of c.rm100m. As such, we believe CSC division is able to contribute PBT of RM10-12m to Tasco in FY19. Possible to obtain approval on Investment Tax Allowance (ITA) We understand that Tasco is in the midst of applying for an Investment Tax Allowance. If Tasco is able to secure the approval, we foresee a tax savings of RM15-20m and probably recognising as early as this financial year, i.e. FY2019F. To recap, Tasco had recognised such tax allowance in FY2011 with a tax saving of RM3.9m, which translated into an effective tax rate of 14.6% (vs statutory tax rate of 25%). In addition, we also understand that total ITA claimed by Tasco during 2003 to 2007 was RM21m. Looking forward, we believe Tasco could sustain its growth trajectory, backed by resilient GDP growth in Malaysia (our in-house 2018 forecast: 5.3%) and a projected global growth of 3.9% by IMF for Earnings Outlook We keep our earnings forecast unchanged for FY19 and FY20 as we believe TASCO s net profit is able to pick up in coming quarters. Major risks: 1.) Higher fuel price, 2.) Change in government policy, 3.) Hiccup in performance due to loss of major customers, and 4.) Slowdown in domestic and overseas economy. Valuation/Recommendation Maintain BUY call for Tasco with a lower target price of RM1.96 (previously was RM2.49). We peg our valuation at PER of 10.3x FY19F EPS. We lower down our target PE valuation in view of its low liquidity of the stocks. Nevertheless, ascribed PER is at +0.5x SD above its historical average trailing PE. Overall, we are sanguine on its future growth following its venture into cold chain market. With this, TASCO is able to generate synergies across all of its divisions and provide integrated logistics services for its clients. Furthermore, the soon-to-be-launched trading business (by YLTC Sdn Bhd, a 60:40 JV between Yee Lee Corporation Bhd and Tasco Bhd) will create further synergy to its existing businesses such as Cold Chain and Contract Logistics. 2

3 Source: Company, JF Apex Source: Company, JF Apex 3

4 Income Statement (RM million) Source: Company, JF Apex 4

5 Balance Sheet (RM million) Cashflow Statement (Source for both balance sheet and cash flow statement: Company, JF apex) 5

6 JF APEX SECURITIES BERHAD CONTACT LIST JF APEX SECURITIES BHD Head Office: 6 th Floor, Menara Apex Off Jalan Semenyih Bukit Mewah Kajang Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) PJ Office: 15 th Floor, Menara Choy Fook On No. 1B, Jalan Yong Shook Lin Petaling Jaya Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) DEALING TEAM Head Office: Kong Ming Ming (ext 3237) Shirley Chang (ext 3211) Norisam Bojo (ext 3233) Institutional Dealing Team: Zairul Azman (ext 746) Fathul Rahman Buyong (ext 741) Ahmad Mansor (ext 744) PJ Office: Mervyn Wong (ext 363) Azfar Bin Abdul Aziz (Ext 822) Tan Heng Cheong (Ext 111) RESEARCH TEAM Head Office: Lee Chung Cheng (ext 758) Lee Cherng Wee (ext 759) Low Zy Jing (ext 754) Nursuhaiza Binti Hashim (ext 752) Siau Li Shen (ext 753) JF APEX SECURITIES - RESEARCH RECOMMENDATION FRAMEWORK STOCK RECOMMENDATIONS BUY : The stock s total returns* are expected to exceed 10% within the next 12 months. HOLD : The stock s total returns* are expected to be within +10% to 10% within the next 12 months. SELL : The stock s total returns* are expected to be below -10% within the next 12 months. TRADING BUY : The stock s total returns* are expected to exceed 10% within the next 3 months. TRADING SELL : The stock s total returns* are expected to be below -10% within the next 3 months. SECTOR RECOMMENDATIONS OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months. MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to 10% within the next 12 months. UNDERWEIGHT : The industry as defined by the analyst, is expected to be below -10% within the next 12 months. *capital gain + dividend yield JF APEX SECURITIES BERHAD DISCLAIMER Disclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report. Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JF Apex Securities Berhad and are subject to change without notice. JF 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. JF Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against JF Apex Securities Berhad. JF Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of JF Apex Securities Berhad. JF Apex Securities Berhad is a participant of the Mid and Small Cap Research Scheme ( MidS ), and will receive compensation for the participation. This report has been prepared by JF Apex Securities Berhad pursuant to the MidS administered by Bursa Malaysia Berhad. This report has been produced independent of any influence from Bursa Malaysia Berhad or the subject company. Bursa Malaysia Berhad and its group of companies disclaims any and all liability, however arising, out of or in relation to the administration of MidS and/or this report This report is also accessible at Published & Printed By: JF Apex Securities Berhad (47680-X) (A Participating Organisation of Bursa Malaysia Securities Berhad) 6