TASCO: Logistics Provider Navigates Headwinds as Earnings Fall Below Expectations, Analyst Maintains Buy Rating
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Core earnings for a leading logistics provider came in below expectations for the first half of fiscal year 2026, primarily impacted by a higher-than-anticipated effective tax rate and softer performance across several key divisions. Despite these challenges, an investment bank has maintained its “BUY” recommendation, adjusting its target price to RM0.25.
Performance Review
The company’s 1HFY26 core earnings represented only 36-41% of full-year estimates by both the investment bank and consensus. This shortfall was largely attributed to a notable increase in the effective tax rate, which rose to 20.6% from 16.5% in 1HFY25. Furthermore, segmental margins experienced a decline, with weaker performances observed in the supply chain solutions (SCS), cold supply chain (CSC), and trucking (TD) divisions.
In the second quarter of FY26, the International Business Solutions (IBS) division recorded a modest 1% quarter-on-quarter revenue increase but saw a significant 28% year-on-year decline. Profit Before Tax (PBT) for IBS was notably down 47% QoQ and 30% YoY. For 1HFY26, IBS revenue fell 16% YoY, mainly due to weaker air freight forwarding (AFF) amidst reduced shipment volumes from key customers in the FMCG, aerospace, and E&E sectors. However, 1HFY26 PBT rose 37% YoY, driven by recovering air freight rates since June and a strong performance from the SCS division (+99% YoY).
The Domestic Business Solutions (DBS) segment also experienced a decline in 1HFY26 topline and PBT (17% and 32% YoY respectively). This segment was primarily weighed down by the CSC wing, where both revenue and PBT declined significantly following the exit of several F&B customers. Contract logistics also softened, impacted by the closure of a major solar panel customer and reduced customs clearance activities.
Future Outlook and Risks
The transport and logistics sector continues to face challenges from muted trade volumes and persistent geopolitical headwinds, which are expected to cloud near-term earnings visibility. Despite these headwinds, air freight rates have shown signs of recovery since June. The investment bank has revised its FY26F-28F earnings estimates downwards by 13.6-14.6% to account for lower margins in SCS, CSC, and TD, alongside the higher effective tax rate. Key risks identified include the potential loss of major customers and a further decline in operating margins.
Despite the revised earnings forecast, the investment bank reiterates its “BUY” call. The target price has been adjusted to RM0.25, reflecting a potential 25.0% upside from the last traded price of RM0.20. The valuation implies a FY27F P/E of 7.6x, which remains below its 5-year mean of 9.4x.
