Stable growth in volume throughputs is expected to be a boon for the integrated logistics solutions provider, says RHB Investment
by ANIS HAZIM / Pic credit: tasco.com.my
RHB Investment Bank Bhd expects logistics service provider, Tasco Bhd, to book a robust year-on-year (YoY) growth in its upcoming fourth quarter of 2022 (4Q22), which results in strong performances underpinned by buoyant volume throughput and favourable freight rates.
RHB Investment’s analysts Lee Meng Horng and Raja Nur Aqilah Raja Ali continue to like Tasco for its undemanding valuation and positive earnings momentum despite Covid-19 challenges.
“This is alongside multiple growth avenues driven by capacity expansions, tax incentives and forays into new markets such as food retail, healthcare and e-commerce,” stated Lee and Raja Nur Aqilah in a research note yesterday.
With the impending broader economic reopening, the analysts expect stable growth in volume throughputs to be a boon for an integrated logistics solutions provider like Tasco.
They noted Malaysia’s export and import volumes continued to rise in January (+7% and +18% YoY) and February (+0.3% and +10.1% YoY), according to the Department of Statistics Malaysia.
“This is further complemented by the projected 5.3% to 6.3% GDP growth projected for 2022, driven in part by gross exports that are projected to grow by 10.9%,” they added.
The analysts noted the tightness in air and ocean freight markets is expected to persist in view of port congestion (in Los Angeles and Shanghai).
“This points to a positive outlook for Tasco’s freight forwarding segment, as freight rates remain elevated and are further supported by the demand from a diverse clientele base across various economic sectors — namely its sizable exposure to the electrical and electronics segment and new business wins,” they noted.
They opined Tasco’s ease of access to in-demand cargo spaces — in the face of a supply chain disruption — to meet customers’ urgent shipping needs and backing from NYK Line’s logistics network puts it on a path toward steady volume growth.
As results are to be released on April 28, RHB Investment expected Tasco to continue its strong growth momentum and end FY22 with record earnings.
RHB kept a ‘Buy’ call on Tasco with a target price of RM1.90, pegged to a 19 times target price earning from 22 times on FY23F earning per share after taking into account the rising yield environment and higher risk premiums related to external vents.
The downside risks to its call are weaker-than-expected recoveries in freight volumes and higher-thanexpected operating expenditure.