PETALING JAYA: Logistic companies are still getting much love from the market, with investors smitten by the sector’s close link with the country’s booming e-commerce industry.
At MIDF Research, Tasco Bhd looks like a sure bet. The firm yesterday initiated its coverage on the freight forwarder with a “buy” call and a target price of RM2.91.
The target price gives investors a 22% upside from the stock’s last traded price of RM2.37 yesterday.
Shares in Tasco had jumped 58% year-to-date, spurred by optimism that its acquisitions of two cold transport companies for a combined RM332mil in January will pay back handsomely for the company.
“Combined, the acquisitions are worth about 70% of Tasco’s current market capitalisation, reflecting the company’s intention to grow,” MIDF Research said.
When completed later this year, the acquisitions will propel Tasco from having zero cold storage facilities to among the top two in the country with the most cold storage pallet count.
MIDF Research said the all-cash nature of the acquisition would not create a dilution in earnings per share (EPS) for Tasco.
“On the contrary, we estimate incremental EPS as a result of the acquisitions as we view them as clear-cut extensions to Tasco’s core domestic logistics business with minimal product overlap or staff redundancy,” it said.
MIDF Research calculated that Tasco’s return on equity will improve to 13.7% this year, up from 9.4% in 2016, boosted by the acquisitions of Gold Cold Transport Sdn Bhd and MILS Cold Chain Logistics Sdn Bhd.
“This aside, we are forecasting a three-year projected earnings compounded annual growth rate (CAGR) of 20.2%,” it said.
MIDF Research expects Tasco’s core net profit after tax and minority interests to increase to RM48.7mil in financial year ending Dec 31, 2018 (FY18) from a projected RM31.2mil in FY17.
At its target price, MIDF Research valued the stock at 12 times its projected earnings in FY18.
“We are forecasting a 38% dividend payout ratio, potentially translating into decent dividend yields of 3.8-4.2% for FY18 and FY19,” it said.
Tasco, which started operations in 1974, is one of Malaysia’s largest total logistics companies. It is also a subsidiary of the NYK Group, one of Japan’s largest shipping and logistics companies.
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