Unprecedented 3Q growth for Tasco amidst pandemic
KUALA LUMPUR: MIDF Amanah Investment Bank Bhd (MIDF Research) deem Tasco Bhd’s (Tasco) perfromance to be stellar as it reports core earnings of RM14.1 million during its third quarter of finnacial year 2021 (3QFY21), a rise by 221 per cent year on year (y-o-y).
This brought its 9MFY21 core earnings for the first nine months of FY21 (9M) to RM30 million, which came in line with MIDF Research’s growth prediction.
“Tasco has shown unprecedented growth amidst the current pandemic operating environment and we expect the group to continue performing well in 4QFY21 which will in return meet our full-year FY21 earnings estimates,” it commented yesterday.
“The group has shown exemplary top line expansion supported by growth seen across the board. For International segment, revenue recorded for 9MFY21 was RM266.8 million. underpinned by both its air freight forwarding (AFF) and ocean freight forwarding (OFF) divisions, recording growth at 74 and six per cents y-o-y respectively.
“For domestic segment, revenue recorded for 9MFY21 was to the tune of RM383.9 million underpinned by its cold supply chain division (CSC) which saw revenue jump to RM94.1 million.”
Overall, for 9MFY21, Tasco recorded a revenue of RM650.7 million, while its profit before tax (PBT) stood at RM37.5 million – rising by 101 per cent y-o-y – boosted by AFF and CSC divisions.
“Both divisions have shown nearly more than twice margin expansions at PBT level,” MIDF Research continued. “This improvement in operating margin can be attributed to the surge in air freight rates for AFF division and the reduction achieved in non-operating and general expenses attributable to reduced finance costs, professional fees and cost control measures.”
Recall that, under the Integrated Logistics Services scheme, Tasco will be able to enjoy income tax exemption via Investment Tax Allowance (ITA) of 60 per cent on its qualifying capital expenditure (capex) incurred within five years.
This can be offset against 70 per cent of statutory income for each year of the tax relief period.
Furthermore, one of the terms in the approval ;etter stipulated that Tasco shall make capital expenditures related to logistics to the tune of at least RM240 million for a period of five years. Management is sanguine on the prospects of tax saving from the exemption.
“Based on their guidance, there will potential lift of circa RM10 million to RM12 million0m at PAT level, each year of the assessment period on the back of estimated capex of RM400 to RM500 million for the whole period,” MIDF Research estimated.
“The bulk of spending is earmarked for warehouse expansion in Shah Alam which fits the criteria of ‘qualifying capex’, set by the Malaysian Investment Development Authority.”
All these points to FY21 being the starting point of good years ahead for Tasco.
“Our expectation is that the strong performance of its CSCL will put a cork on the earnings erosion from other underperforming DBS segments and mitigate its impact on the group overall performance.
“We view this development favourably as CSCL has been the group’s underachiever and has been impacting the overall earnings since its acquisition. The division found a second wind from MCO as its operations has now broken even and poised for upwards trajectory for its financial earnings.
“Point to note, CSCL is currently the largest cold chain provider in Malaysia with estimated 35 per cent market share of the segment with key customers consists of fast moving consumer goods (FMCG) retailers, F&B players and pharmaceutical groups. Tasco is on its way for record revenue this year which we deemed sustainable for its future.”