KUALA LUMPUR: Tasco Bhd is poised to maintain stellar performance ahead in anticipation of improved earnings on the back of growing top line for international business solutions (IBS), said MIDF Research.
Additionally, brisk recovery on domestic business solution segment (DBS) and margin expansion via investment tax allowance scheme from Malaysian Investment Development Authority will likely support Tasco's future earnings.
MIDF Research said Tasco continued to perform in the first quarter (Q1) of the financial year 2022, with core earnings of RM16.2 million beating its and consensus estimate by 14.0 per cent and 6.0 per cent respectively.
MIDF Research said Tasco's performance was stellar and exceed its growth prediction.
"Tasco has shown unprecedented growth amid the current pandemic operating environment, and we expect the group to continue performing well in the financial year ending March 31, 2022 (FY22)".
MIDF Research said the logistics solutions provider had showed exemplary top line expansion supported by growth seen across the board.
For international segment, its 1QFY22 revenue grew 61 per cent year-on-year (YoY) to RM123.1 million, underpinned by both its air freight forwarding (AFF) and ocean freight forwarding (OFF) divisions, recording growth of 38 per cent and 121 per cent respectively.
For domestic segment, its 1QFY22 revenue jumped 93 per cent YoY to RM116.3 million, supported by its contract logistic division (CL).
"The group's 1QFY22 net profit stood at RM14.4 million (264.0 per cent) YoY growth, boosted by OFF and CL divisions.
"Both divisions have shown more than twice margin expansions at profit before tax level. This improvement in operating margin can be attributed to the surge in premium sea freight rates for OFF division and the reduction achieved in non-operating and general expenses attributable to reduced finance costs, professional fees and cost control measures."
MIDF Research has revised Tasco's earnings forecasts for FY22 and FY23 at RM58.6 million and RM60.1 million, representing 26.3 per cent and 27.6 per cent growth.
"We remain upbeat on the earnings outlook for Tasco. We also revise our target price to RM1.47 from RM1.38 per share as a result of the revision in our earnings forecast.
"Our target price is derived by pegging our FY22 earnings per share to a revised forward price earnings ratio of 20 times.
"Moving forward, we believe the earnings outlook for Tasco will remain sustainable."
MIDF Research maintained a "buy" call for Tasco but said key risks to earnings included lower than expected saving from investment tax allowance scheme and sharp drop in air freight forwarding rates due to return of capacity for long haul "belly" cargo space.