TASCO- sliding top-line led to a dip in bottom-line

Result Update
For QE31/3/2013,
TASCO's net profit dropped 43% q-o-q or 35% y-o-y to RM4.4 million
while revenue dropped by 11% q-o-q or 21% y-o-y to RM93 million.
Revenue dropped due to lower sales in International Business Solutions
[IBS] & Domestic Business Solutions [DBS] segments. The impact of
the poor global economy continued to be felt in the IBS segment. The
drop in Contract Logistics division in the DBS segment was mainly due
to a drop in the customs clearance business.

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Table: TASCO's last 8 quarterly results

It
is quite worrying to see the steady decline in TASCO's revenue over the
past 6 quarters. Despite the declining revenue, its profit remained
steady until QE31/3/2013. This worrying trend needs to be investigated.
Until then, we have to be cautious with TASCO.

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Chart 1: TASCO's last 25 quarterly results

Valuation

TASCO
(closed at RM2.14 yesterday) is now trading at a PE of 8 times (based
on last 4 quarters' EPS of 26.5 sen). At this multiple, TASCO is deemed
fairly valued for a mid-cap stock. However, the declining top-line
& bottom-line should start to depress the PE multiple and with
that, the share price will drop further.

Technical Outlook

TASCO
broke above the horizontal line at RM2.10 last week. This
resistance-turned-support would be sorely tested over the next few
days/weeks. A breakdown of this support as well as the psychological
RM2.00 mark would send the stock to its long-term uptrend line (SS) at
RM1.80.

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Chart 2: TASCO's monthly chart as at May 15, 2013 (Source: quickcharts)

Conclusion

Despite the deteriorating financial performance, TASCO is still rated a HOLD due to its mildly positive technical outlook.

Note:
In
addition to the disclaimer in the preamble to my blog, I hereby confirm
that I do not have any relevant interest in, or any interest in the
acquisition or disposal of, TASCO.

Author : Alex Lu