Positive on Tasco’s outlook on improving air freight rates
KUALA LUMPUR: Tasco Bhd’s (Tasco) outlook has been viewed positively, driven by several factors including improving air freight rates and the investment tax allowance (ITA).
In a report, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) said it upgraded its call on the stock to ‘buy’ as it opine that the upgrade is timely for the group given the confluence of factors have improved the fundamental outlook of Tasco amidst challenging operating environment.
“Moving forward, Tasco will see improved earnings on the back of growing top line for International Business Solutions (IBS), brisk recovery on Domestic Business Solution segment (DBS), and (iii) margin expansion via ITA scheme from MIDA,” it said.
It reiterated its view that the IBS segment will remain boosted by the elevated air freight rates given the persistent capacity shortage brought upon by among others; the unprecedented grounding of passenger flights due to the Coronavirus Disease 2019 (Covid-19).
“At this juncture, we are on the view that spot air freight rates will remain at elevated level, albeit with a slight dip from the peak rates. This is due to persistent capacity shortage in the segment.
“Among others, the shortage is driven by soaring demands due to ocean freight blanked sailings and reduced passenger freighter capacity,” it said.
It noted that passenger freighter or “belly cargo space” for long haul flights make up more than 50 per cent of available cargo capacity prepandemic which was now crippled as border controls and safety measures are enforced on many parts of the world.
“According to International Air Transport Association (IATA), belly capacity for international air cargo was 67 per cent below the levels of August 2019, owing to the withdrawal of passenger carrier services due the Covid-19 pandemic.
“Zooming back on company level, we also believe the heighten prospect on top line improvement of IBS division will cushion and alleviate any shortfall of other segments for Tasco due to disruptions of business,” it added.
The research team also anticipated that the DBS segment’s recovery will be underpinned by strong performance from Cold Supply Chain Logistics (CSCL).
“This is a er the DBS segment saw poor financial result last quarter as the group was impacted by the temporary closure of businesses and production activities a ributable to the enforcement of the movement control order (MCO),” it said, noting that the recent quarter result shown that contract logistics and trucking segments recorded decline in PBT at RM2.7 million and RM1.6 million.
“This was down 50.2 per cent yo-y and 2.7 per cent y-o-y on the back of decline in revenue to the tune of RM60.2 million (down 16.7 per cent y-o-y) and RM10.6 million (down 42.8 per cent y-o-y).”
Fortunately, it highlighted that CSCL division cushioned the earnings erosion from other two segments with a positive result derived from its new grocery store and dairy product customers.