TASCO Bhd’s integrated logistics services (ILS) are eligible for a tax incentive from the Malaysian Investment Development Authority (MIDA), and MIDF Research marks this as a positive for the logistics company.
“Under the ILS, Tasco will be able to enjoy income tax exemption via an Investment Tax Allowance (ITA) of 60% on its qualifying capital expenditure incurred within five years. This can be offset against 70% of its statutory income for each year of the tax relief period,” said MIDF.
The research house noted that Tasco’s management has also disclosed that one of the terms in the approval letter received from MIDA stipulated that Tasco has to make capital expenditures related to logistics to the tune of at least RM240 mil for a period of five years.
“Based on the guidelines from MIDA, to qualify for the exemption, among others, Tasco must
increase fixed asset investments of at least 50% on top of existing fixed asset investments related to logistics, or increase fixed asset investments of 30% on top of existing assets depending on the company capex investment allocation.”
“The asset size and required capex investment of RM240 mil is in line with the terms stipulated by the approval letter and the guidelines from MIDA,” said the research house.
MIDF estimates that the savings from the tax exemption could translate to between RM3 mil to RM4 mil for Tasco’s 2021 and 2022 financial years. However, these estimates are subject to further disclosure from Tasco’s management.
The research house maintains a neutral call on Tasco, with a target price of RM1.32 from a previous 80 sen, citing a recent upward movement in share price resulted in limited price appreciation going forward, as all positives have been priced in at this point.
“Tasco share price has spiked up to RM1.45 yesterday prior to the announcement of the tax incentive. This is significantly higher from its trading range of 80 sen to RM1 during the last few weeks.”
The research house also noted that Tasco’s share price had been on a steady decline from its peak of RM2.60 in May 2017 to its lowest point of 65 sen during the movement control order in April 2020.
At 2.30pm, Tasco’s shares were last done at RM1.46, up a sen, with 705,400 shares traded. – Sep 11, 2020
