Tasco Berhad displayed resilience amid market challenges and projected a positive outlook for the upcoming quarters, according to reports by MIDF Amanah Investment Bank (MIDF) and RHB Investment Bank (RHB). The logistics firm navigated increased freight rates and port congestion effectively, maintaining strong storage revenue in its cold chain business despite shifts in consumer preferences.
MIDF maintained its BUY recommendation with an unchanged target price of RM1.20, highlighting the adjustments in tender prices to counter rising freight rates and the introduction of trailer detention charges to manage port congestion.
RHB also reiterated its BUY stance, setting a target price of RM1.15 and noting the company's strong growth prospects, improved freight forwarding outlook, and contributions from new warehouses.
Tasco's international business solutions segment faced challenges due to lower contract tender prices despite rising market costs, impacting its freight forwarding operations. Management adjusted tender prices for the second quarter to mitigate these issues, incorporating clauses to revise prices if market rates increased by 10% over tendered prices.
The domestic business solutions segment saw reduced volume from a major solar panel customer due to US sanctions and inefficiencies caused by port congestion, prompting the introduction of trailer detention charges ranging from RM50 to RM80 per day starting July 2024.
The company's new Shah Alam Logistics Centre (SALC), completed in February 2024, operated at 55%-60% utilisation, with Tasco managing warehouse exchanges to align with customer requirements. The cold chain business remained resilient due to strong storage revenue, despite slower goods movement affecting transportation.
Freight rates were expected to remain elevated due to a shortage of vessel space, particularly during the peak October-December period, prompting Tasco to refine its strategy for balancing tendered versus spot rate business.
RHB emphasised that Tasco's contract logistics segment booked a first-quarter profit before tax (PBT) of RM6.1m, supported by contributions from a new automotive customer despite regional port congestion. The integrated logistics player anticipated stronger earnings in the upcoming quarters from improved margins in its air and ocean freight forwarding units, benefiting from adjusted selling prices.
Full contributions from new warehouses (SALC and WPLC) of 850k sqft and continued enjoyment of integrated logistics services (ILS) tax incentives, with unclaimed tax credits of over RM32m, were expected to further bolster Tasco's earnings.
