Tasco’s earnings forecast to grow strongly in FY21


TASCO Bhd’s earnings are projected to grow strongly on the recent approval of tax incentive, coupled with its capacity expansion plan that costs RM400 million.

Inter-Pacific Research Sdn Bhd forecasts the group’s earnings to increase by 114.3% and 38.8% year-on-year (YoY) for the financial year ending March 31, 2021 (FY21), and FY22 respectively, boosted by the aforementioned two factors.

Its equity research analyst Daryl Law revised Tasco’s target price to RM2.12 from RM1.17 previously.

“Earnings are very dependent on the economic outlook, which remains cloudy. Their cold chain business is a bright spot that continues to see stable growth and has been operating at about 90% capacity,” he noted in an email reply to The Malaysian Reserve on Tuesday.

Law said the Movement Control Order (MCO) had affected the total logistics solutions provider’s domestic business, mainly their trucking and contract logistics segment which includes haulage, warehouse and in-plant services as client businesses had to close temporarily.

Tasco’s freight business, however, saw higher sales on the back of high rates, despite lower volumes. At the same time, its revenue was supported by cold chain business that primarily caters to food-related products.

The Conditional MCO, which was recently imposed, may be less disruptive and have a minimal impact to the group since the duration for the movement restriction is only for two weeks. Law, however, noted that the situation is still developing.

“A slowdown in business activity should see some carry forward due to backlog orders such as the case in June when Tasco reported record-high volumes compared to the disruption from the early stages of the MCO,” he added.

The group’s executive chairman and substantial shareholder Lee Check Poh recently told The Edge it would spend RM400 million over the next five years for the expansion of its warehouses.

Last month, the group obtained approval from the Malaysian Investment Development Authority to conduct integrated logistics services activities as its expansion project.

The tax incentive will enable income tax exemption through investment tax allowance (ITA) of 60% of its qualifying capital expenditure incurred within five years.

The ITA can offset against 70% of statutory income for each year of assessment.

For its first quarter ended June 30, 2020, Tasco’s net profit jumped 105.6% YoY to RM2.64 million from RM1.28 million in the same period last year, mainly attributable to its international business solutions segment.

Its revenue, however, slipped 1% to RM178.57 million in the same period from RM180.4 million dragged by its domestic business solutions (DBS) segment, which recorded a decrease of RM17.3 million or 14.5%, to RM102.2 million from RM119.5 million due to the MCO.

The group said the impact of the MCO to DBS was felt mainly in April.