MIDF raises target price for Tasco to RM1.32 on tax incentive approval

KUALA LUMPUR (Sept 11): MIDF Research maintained its "neutral" stance on Tasco Bhd with a higher target price (TP) of RM1.32, from 80 sen, after the group received approval of the Malaysian Investment Development Authority (MIDA) for the second round of tax incentives to carry out Integrated Logistics Services (ILS) activities.

“Our target price is derived by pegging our FY21 EPS [earnings per share] to a revised forward PE ratio of 15.0x, which is 1-SD above its two-year mean at pre Covid-19 level,” said MIDF in a note today.

Following that, MIDF also revised its EPS forecast for the group for FY21F -FY22F to 8.80-9.75 sen from its previous forecast of 7.30-8.30 sen.

“Key risk to our estimates is lower than expected earnings impact from the tax incentive as we wait for more communication from management on capex [capital expenditure] decisions, investment financing and strategic directions, among others,” it said.

It noted that Tasco's share price had spiked up to RM1.45 yesterday prior to the announcement of the tax incentive, saying that it is significantly higher from its trading range of 80 sen-RM1.00 during the last few weeks.

“The increase translates to a price appreciation of about circa 45%-81%. Recall that, its share price has been in a steady decline from its peak of RM2.60 in May 2017 to its lowest point at 65 sen during peak-MCO (Movement Control Order) back in April 2020,” said MIDF.

Moreover, MIDF said it anticipates that both [the] demand and supply side of the economy will witness protracted weakness and demand will take longer to recover to pre-Covid levels and this in turn will impact logistics players such as Tasco.

“Furthermore, we believe that share price at the current level is not sustainable as the share price is trading beyond 1-SD away from forward PE mean (19.0x versus 13.0x) as the company remains impacted by the ongoing Covid-19 developments.

“In addition, the recent upward movement in share price has also resulted in limited price appreciation going forward given that all positives have been priced in at this juncture. All things considered; we are maintaining our ‘Neutral’ stance on Tasco,” it said.

At 11.22 am, shares in Tasco were three sen or 2.07% higher at RM1.48, with a market value of RM298 million.