Tasco benefits financially from higher freight rates

Its revenue in 3Q22 jumped to RM455m or 87.5% YoY 

By ANIS HAZIM / Pic Source tasco.com.my

TASCO Bhd’s core profit after tax and minority interest (Patami) of RM58.2 million during the first nine months of 2022 (9M22) comes as a positive surprise to analysts. 

MIDF Amanah Investment Bank Bhd Research (MIDF Research) said the logistics group’s Patami exceeded its expectations and consensus at 99% and 100% of full-year estimates respectively. 

“The group’s revenue in the third quarter of 2022 (3Q22) jumped to RM455.1 million or 87.5% year-on-year (YoY) mainly on the back of the elevated freight rates which have been benefitting both its ocean and freight forwarding divisions,” MIDF Research stated in a report on the company last week. 

Tasco’s international business solutions (IBS) segment recorded revenue of RM294.4 million (up 186.7% YoY) which was almost a two-fold increase. 

The recovery in business activities had prompted the increase in revenue from the domestic solutions segment (DBS) to RM160.7 million (14.7% YoY), MIDF Research added. 

Its 3Q22’s core Patami increased to RM26 million or 84.8% YoY after the exclusion of the post-flood exceptional item which amounted to RM15.9 million. 

“During the nine-month period, Tasco’s revenue soared to RM1.06 billion (63% YoY) mainly due to the above-mentioned reason that has caused the IBS segment to record RM575 million (115.5% YoY) in revenue,” MIDF Research noted. 

The broker added the broader-based eco- nomic recovery has also played a part in boosting the domestic and export activities which have helped the contract logistics and trucking divisions to grow and generate higher revenue of RM485.6 million (26.5% YoY) for the DBS segment. 

Subsequently, MIDF Research noted Tasco’s core profit after tax (PAT) in 9M22 rose 94% YoY to RM58.2 million. 

“With the higher-than-expected earnings, we revised our financial year of 2022 (FY22) earnings estimate upwards by 25% to RM73 million as we foresee the freight rates to remain elevated in the intermediate-term,” MIDF Research added. 

MIDF Research has maintained a “Buy” call on Tasco with a lower target price of RM1.44, pegged to FY23 earnings per share to a revised price-earnings ratio of 18.3 times which represents its five-year historical average. 

“This is to take into account the downside risk of normalising freight rates,” it said. 

Downside risks to the call include lower than expected tax savings from the Malaysian Investment Development Authority’s incentives, and a bigger than expected drop in air freight rates following wide-spread long-haul passenger flights return to service.