KUALA LUMPUR: MIDF Research has upgraded its call to “buy” from “neutral” for Tasco Bhd with a higher target price of RM4.57 from RM2.56 previously on the back of positive earnings outlook ahead.
“Our target price is derived by pegging our earnings per share of financial year 2022 (FY22) to a revised forward price-to-earnings ratio (P/E) of 20 times, previously 11.7 times – which is the above +1 standard deviation of B/F 2 years P/E ratio.
“Upon the approval and completion of the share split exercise, our target price will be revised RM1.14 per share to account for the enlarged share base, ” it said.
The research expected improved earnings for the group’s upcoming fourth quarter ending March 31,2021 due to growing topline for international business solutions, sharp recovery on domestic business solution (DBS) segment and margin expansion through investment tax allowance scheme from the Malaysian Investment Development Authority.
“Tasco has shown unprecedented growth amid the current pandemic operating environment and we expect the group to continue performing well in Q4,2021 which will in return meet our full-year FY21 earnings estimates, ” it said.
The research house has revised both its top line and earnings forecast for FY21 and FY22 forecasts to RM814.3mil and RM845.9mil and RM41mil and RM45.7mil respectively. As such, MIDF Research has revised the group’s earnings by 3.1% and 4.3% for FY21 and FY21 forecasts.
Tasco’ strong performance in the cold supply chain logistics (CSCL) would put a “cork on the earnings erosion.
“We view this development favourably as CSCL has been the group’s underachiever and has been impacting the overall earnings since its acquisition.
“Tasco is on its way for record revenue this year which we deemed sustainable for its future, ” said MIDF Research.
Currently, CSCL is the largest cold chain provider in Malaysia with an estimated 35% market share of the segment.
For Q3,2021, the group posted core earnings of RM14.1mil, which brought its first nine months of the year’s (nine-month 2021) core earnings to RM30mil.
MIDF Research said the results for Q3,2021 was in line with its estimate at 75% and beating consensus estimate at 83%.
However, the research house noted that the key risks to Tasco’s earnings are lower than expected saving from the investment tax allowance scheme and sharp drop in air freight forwarding rates due to return of capacity for long haul belly cargo space