Since we picked TASCO as our top buy among small cap
logistics stocks under our coverage on 18 Oct 2011, its
share price has surged by some
38% to its all-time intra-day high of RM2.05
yesterday. As macroeconomic conditions seem more being now coupled with the
resilience of its 3rd party logistics (3PL) business, we are raising revenue forecasts for this segment,
as well as volume growth for TASCO’s sea
and air freight business. We are tweaking up our revenue and earnings forecasts
by 7% for FY12 and 4%-8% for FY13 respectively, after which our FV goes up
to RM2.33 (previously RM2.18), based on
an unchanged 6.5x FY12 PER. We maintain
a BUY on TASCO, for its low PE of 4.2x vs the industry average PE of 7x.
Volume expands on better
macroeconomic outlook. As the macroeconomic outlook turns more positive,
TASCO has benefited from the pick-up in trade activities, especially in Asia
and Japan, as well as on the domestic front.
Recall that the group posted strong earnings growth of 38% in FY11 on
the back of resilient volume handled. The outlook for trade activities is
improving, judging from the latest data
from Malaysia’s Department of Statistics, which showed that Malaysia’s Jan 2012 exports to Japan,
Asean and US improved by 26.6%, 1.2% and 1.1% y-o-y respectively. Leveraging on
its Japanese major shareholder NYK Group’s global logistic network and
expertise, we think TASCO will continue to display resilient growth, bolstered
by its aggressive sales and marketing efforts in promoting its total logistics
services to MNCs. We also gather from management that it saw some urgent
shipments of E&E and FMCG products in 1Q, particularly from Feb-Mar. In
addition, we believe the upcoming major sport events like the 2012 Olympics and
Euro 2012 will help boost the shipment of LCD and plasma
TVs via its sea and air freight services. These developments prompt us to
nudge up our volume assumptions
for the company’s sea freight by 4% to
168,000 TEUs and air freight by 3% to 18,000 tonnes for FY12.
3PL leads the way.
We expect the group’s 3PL business, providing comprehensive solutions
encompassing warehousing, air, sea and land freight services, to continue to be
the key growth driver. We gather that the group has minimal exposure to US and
Europe, which helps fuel our optimism on the company. Besides, the group is
shipping mainly consumer products with strong branding whose demand is fairly
inelastic. With a growing clientele and
the fact that almost 96% of its current warehouse space is taken up, TASCO announced
to Bursa yesterday that it had entered into a sale and purchase agreement with Port
Tanjung Pelepas SB to buy 5 acres of land in PTP for RM5.5m cash. As the
company is utilizing internally
generated funds, the land purchase will
not greatly affect its net gearing given that this is within
our capex projection. In view of the healthy expansion
of the 3PL segment
and the growing demand among MNCs
to outsource their logistics requirements,
we are bumping up our 3PL revenue forecast by 5% and 7% for FY12-13 respectively.
Source: OSK188
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