PETALING JAYA: Tasco Bhd
is expected to continue facing softer demand in its contract logistics (CL) and cold supply chain (CSC) segments, although the expansion of its warehouse capacity could partly cushion the weakness.
RHB Research said the persisting weakness in CL and CSC is due to lower project shipments in the customs clearance business and the loss of a key customer in CSC.
“The new warehouses at Shah Alam Logistics Centre and Northport, with a combined capacity of 700,000 sq ft, were completed in June and are expected to commence operations in August, following the closure of 370,000 sq ft of existing warehouse space.
“Overall, this is expected to generate monthly savings of about RM200,000 to RM300,000,” the research house said in a recent report.
RHB Research said post-analyst briefing, it cut its financial year 2027 (FY27) to FY29 earnings forecast for the company by about 7% each year.
Additionally, the research house said despite the first quarter of FY27 (1Q27) results coming in below expectations, earnings should improve in the second half of FY27 (2H27), supported by the commencing operations of the new warehouses and the integrated logistics services (ILS) tax rebate in 4Q27.
Tasco’s valuation, though, RHB Research said remains appealing at about eight times, or one standard deviation lower than its five-year average of 10 times.
“1Q27 core earnings slipped about 29% year-on-year and about 23% quarter-on-quarter at RM7.2mil, representing about 15% to 16% of our and consensus estimates. The negative deviation was mainly driven by weaker-than-expected ocean freight forwarding (OFF), CL, and CSC,” the research house said.
RHB Research said the weaker-than-expected OFF was mainly due to vessel space shortages among global carriers amid the Middle East conflict.
“This prompted high-value data centre cargoes to shift towards air freight forwarding (AFF), supporting stronger-than-expected AFF performance. Management expects this trend to persist into 2Q27,” the research house said.
RHB Research said the ILS tax incentive is expected in 4Q27, with management continuing to guide for a sub-20% effective tax rate for FY27, with the bulk of the tax rebate expected in 4Q27.
RHB Research trimmed its FY27 to FY29 earnings by 6.7%, 6.5% and 6.5% after imputing softer OFF, CL and CSC, while partly offset by a higher AFF.
The research house maintained its “buy” call on Frontken with a new target price of 62 sen (from 66 sen) based on an unchanged 12 times price-to-earnings ratio, inclusive of a 2% environmental, social and governance premium.
“Key risks include loss of key customers and a decline in operating margins.”
