PRTASCO: Operational Strength and Strategic Shifts Drive Positive Outlook, Target Price Raised

A leading investment bank has maintained its “BUY” recommendation for the company, citing strong operational performance and strategic shifts towards higher-margin businesses. While reported earnings for 2QFY26 were slightly below consensus due to a one-off tax adjustment, analysts noted robust underlying margin expansion and a positive future outlook, leading to an upward revision of the target price.

Performance Review

The company’s 2QFY26 results were influenced by a higher effective tax rate (ETR) of 23.5%, adjusted from a prior quarter’s understatement in the cold chain segment. Despite this, the group’s strategic pivot proved effective in boosting margins. The air freight forwarding (AFF) segment, despite a 61% year-on-year revenue decline in 1HFY26 due to the scaling back of low-margin jobs, successfully expanded its pre-tax profit (PBT) by 18% year-on-year. Similarly, the contract logistics (CL) segment reported a 22% year-on-year revenue increase, with PBT nearly doubling (+99%) following the discontinuation of a low-margin solar panel customer. Management anticipates the ETR will normalize to around 20% in subsequent quarters.

Future Outlook and Growth Drivers

The company is actively diversifying its client base and securing new business across key segments. Notable wins include a new F&B client in the cold supply chain, a regional semiconductor hub in Penang (scheduled for July 2026), and a fashion retail customer for its logistics centre (which began operations in October 2025). These additions are expected to underpin growth momentum into FY26 and beyond. Furthermore, the company benefits from approximately MYR33.4m in unutilised tax credits from the Integrated Logistics Services (ILS) tax incentive, offering a lower-than-statutory tax rate and supporting future profitability. Despite challenging operational backdrops affecting some customer volumes, management projects steady overall volume growth.

Valuation and Recommendation

Analysts have revised their target price upwards, reflecting confidence in the company’s strategic direction and financial resilience. The “BUY” recommendation is maintained, based on the company’s diversified earnings base, strong cash flow generation, and a solid balance sheet. Key risks identified include potential loss of key customers and a decline in operating margins.