RHB Research said Tasco will likely exhibit a tale of two halves, with the first half of this year being lacklustre for its business before robust recovery sets in the second half of 2023.
PETALING JAYA: Tasco Bhd
is expected to register stronger performance in the second half of 2023 in tandem with the anticipated recovery in trade activities.
The optimistic outlook for the logistics and warehousing services provider is also supported by contributions from its new warehouses and tax incentives.
According to RHB Research, Tasco will likely exhibit a tale of two halves, with the first half of this year being lacklustre for its business before robust recovery sets in the second half of 2023.
“We expect a slow start to Tasco’s first quarter (1Q) of its financial year ending March 31, 2024 (FY24), owing to seasonal factors and slower trade activities,” the brokerage said.
“We anticipate a significantly better second half of 2023 as trade activities recover, and with maiden contributions from new warehouses and lower effective tax rates,” it said in its report yesterday.
RHB Research maintained its “buy” call on Tasco, with a lower target price of RM1.70, as compared with RM1.83 previously following a downward revision in its FY24 earnings forecast for the company.
“We cut FY24 earnings by 6.6% to account for a normalised freight market,” it explained, adding that the revised target price was based on an unchanged 15 times price-earnings ratio (P/E).
It noted that at current share price, Tasco was valued at 6.9 times P/E, which was below local and regional peer average, hence justifying its “buy” call.
“Tasco below-peer valuation presents a compelling investment proposition into the country’s leading integrated logistics player with consistent earnings delivery and cash flow generation,” RHB Research said.
It expects Tasco’s performance for 1Q24 to be weaker year-on-year and quarter-on-quarter, given the slower freight volumes in April and May, and a weak freight rate environment.
The slower-than-expected volumes were due to a lack of activities due to the Aidilfitri holiday season in April and the long Golden Week holidays in Japan and China in May.
However, RHB Research said encouraging upticks in shipment volumes were seen in June and July.
Meanwhile, it noted that the construction of the Tasco’s 600,000 sq ft four-storey Shah Alam logistics centre is on track, and the handover of rental space to its electrical and electronics and retail customers was expected in 4Q24.
In addition, the new 250,000 sq ft Westport logistics centre expansion was set to be completed by November, in time to cater to a new customer.
“It is expected to generate around RM20mil rental income per annum (excluding other services),” it said.
