Analysis of TASCO Berhad

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

Background Information From IPO Prospectus
TASCO Berhad (hereafter called "TASCO") listed in Bursa Malaysia on December 2007 is principally engaged as a total logistics solutions provider while its subsidiary companies are principally involved in the business of truck rental, in-house truck repair and maintenance, insurance agency services and warehouse rental as well as freight forwarding service providers and alliances with NYK Group for global logistics operation which comprises six core business divisions: Ocean, Air, Land, International Freight, Auto Logistics and International Network Solutions.

• Forecast of PE 7.43 times for FY 2008 based on EPS 14.8 cents.
• NTA per Share RM1.46 as at 31 August 2007
• Market Capitalization upon listing is RM110,000,000 based on RM1.10 issue price for 100,000,000 shares.
• Proceeds RM18.5 million mainly for the development of Bangi Logistics Centre to reduce storage constraints, lower down operation costs and enhance revenue, and acquisition of Port Klang Logistic Centre (PKLC) to strengthen market position as it contributed significantly Group's revenue and save on rental cost.

Operation Profit Margin (OPM)
In the latest annual report of TASCO, it's operation comprises the following six business divisions and two segments:

The international and domestic segment both have equal proportion on contribution to group's revenue of all reporting periods, but domestic segment contributed close to 80% operation profit in the recent years' financial result. It was understandable that the management focus on growing the domestic businesses as it has more stable operation profit margin compare to the international segment. However, as international segment is asset-light business, which required less capital commitment compare to domestic segment, the recent years' financial result may show that the management under-grow the business of this segment.

Financial Summary

The Compounded Annual Growth Rate (hereafter called "CAGR") of the Revenue of TASCO is average, 5.73%. Even with average growth of revenue, it still managed to achieve CAGR of Earning per share (hereafter called "EPS") about 18.9%. The management need to put more effort on growing revenue. The CAGR of Total Liabilities is about 13%, but it was still considered healthy as still achieve 6% margin compare to earnings growth rate.

Rate of Returns and Financial Leverages

TASCO achieved satisfactory of Return On Average Equity (hereafter called "ROAE"), average about 10% for the 5 years period, doing well especially in 2010, 12.2%. Return On Average Asset (hereafter called "ROAA") is moderate, in the range of 6.5% to 8.8%. The aspect which worth paying more attention is the financial leverages adopted by the company, which measured by Debt to Equity Ratio is below 40% except 2007, it show that the management is conservative on the use of financial leverages.

How Much It Worth?
Given the company CAGR of EPS is 10% (approximately 18.9% in the past 5 years) and Dividend Per Share is 6% in the next 10 years, the EPS of the company will be RM$0.26 in 2020 (included adjustment of 2 bad years in 10 which reduce 35% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$0.77 (included adjustment of 2 bad years).

If the stock price of TASCO sell at 7.5 times earning in 2020, it is RM$1.97 and included total dividends received, it is RM$2.74 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$2.74 discounted to today price, it is RM$1.62 per share.

The discounted price is merely 4.58% higher comparing to today (25 October 2011) closing price RM$1.55. I don't think the stock is undervalued, what do you think?