Tasco earnings likely to improve in coming quarters

RHB Research said a host of factors should work in favour of the logistics services provider.

PETALING JAYA: A recovery in the manufacturing sector and contributions from its new warehouses, coupled with tax incentives, should see Tasco Bhd registering stronger numbers for the rest of its financial year ending March 2024 (FY24), predicts a research house.

After recording a soft first quarter ended June 30 (1Q24), RHB Research said a host of factors should work in favour of the logistics services provider, including the flattening out of freight rates, as well as the expected recovery of trade activities beyond the fourth quarter of 2023.

“Also, in line with our economists’ expectation and evidenced by the pick-up in July’s industrial production index, manufacturing activities may begin bottoming out by end-3Q23.

“We think that Tasco should see a much softer year-on-year drop in its international business segment numbers ahead,” said the research unit.

It further forecast that net profit for Tasco should recover and continue strengthening in the coming quarters, primarily due to a low base and pick-up in demand, in view of the festive season at the year-end.

At the same time, it is expecting Tasco’s new 250,000-sq-ft Westport Logistics Centre expansion to be completed by November and providing a growth catalyst for the company in FY24 and FY25.

Meanwhile, the group’s 600,000-sq-ft four-storey Shah Alam Logistics Centre is expected to be handed over to its electric and electronics as well as retail customers in 4Q24.

RHB Research said in a note: “These are expected to generate a rental income of approximately RM20mil per annum for Tasco.

“With that, we expect Tasco to record a much better performance in the second half of FY24, from the maiden contribution from new warehouses, which should fetch wider margins compared to that of its current rented warehouse.”

Although largely optimistic, the securities firm acknowledged that export and import momentum had continued to slow down in July and August, due to a delayed recovery in Malaysia’s trade performance and the possibility of a year-on-year decline in exports being extended into the final quarter of the year.

While saying the downside risks are mainly hinged on China’s prolonged weakness and the global technology downcycle, it nevertheless noted that the signs of bottoming out in manufacturing activities by end-3Q23 is on the cards, and lends optimism over the likelihood of an inflection point drawing near.

RHB Research is keeping its “buy” call on Tasco with a target price of RM1.45.

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