Pos Malaysia’s performance to improve gradually, analyst says


AMINVESTMENT Bank Bhd (AmInvest) has maintained a ‘Buy’ call on Pos Malaysia Bhd with a target price of RM1.07 per share as the logistics group’s projected loss is expected to narrow in financial year 2021 (FY21) to RM62 million and post a net profit of RM52.1 million in FY22.

The investment bank remains cautious on Pos Malaysia’s outlook in FY21 noting that it will take time for the group to recover market share loss due to the shutdown of its main process centre between October and November 2020, as well as for its operations to fully normalise and recover from the Covid-19 pandemic.

“At 16 times forward earnings, we value Pos Malaysia at a discount to its peer Singapore Post’s 19 times to reflect Pos Malaysia’s tougher competitive landscape in Malaysia.

“Pos Malaysia’s FY20 results disappointed with a wider than expected net loss of RM163.7 million against our net loss forecast of RM63 million and RM55.3 million by market estimates,” it said in a research note yesterday.

It added that looking beyond FY21, the outlook for the parcel delivery segment, of which Pos Malaysia is one of the top three players in Malaysia, remains positive underpinned by the structural and irreversible change in consumer preference towards online shopping, as well as the freeze on new courier licences in Malaysia from September 2020 to September 2022 to ensure rational competition in the segment.

Pos Malaysia shares closed nine sen lower at 89.5 sen yesterday after it undertook a one-off impairment amounting to RM181 million which caused it to suffer a net loss RM232.35 million for its fourth financial quarter ended Dec 31, 2020 (4Q20), compared to a net profit of RM7.43 million the company made in 4Q19.

The impairment included provision of RM123.3 million for goodwill, RM41.6 million provision for a mutual separation scheme and RM16.2 million in property, plant and equipment impairment.

The postal group’s revenue dropped 12.6% year-on-year in the quarter to RM544.63 million as revenue from mail and inter-national businesses declined. Loss per share amounted to 29.68 sen.

For the full FY20, Pos Malaysia recorded a net loss of RM308 million on RM2.33 billion in revenue.

Pos Malaysia benefitted from the revised postage rates for commercial mail implemented in February 2020 and higher parcel volume due to the increase in online shopping throughout the restriction periods in the year.

Pos Malaysia group CEO Syed Md Najib Syed Md Noor said the challenges and uncertainty brought about by the Covid-19 pandemic last year tested the group’s resilience and responsiveness toward sustaining its business, while ensuring its planned transformation initiatives were carried out to remain relevant in the market.

He added that the progress of its transformation journey and improved financial performances seen in 2Q20 and 3Q20 have provided the confidence in making. Improvements to the group’s profitability this year.

“The group is currently executing its business recovery plan and is confident that the aviation sector will recover if the Covid-19 pandemic can be brought under control this year.

“We will continue our transformation journey to further improve our position in enhancing customer experience, riding on technology and digitalisation, while leveraging the exponential growth of the e-commerce sector,” he said in a statement yesterday.

Moving forward, the group will continue to rationalise under- utilised mail infrastructure in its ongoing efforts to streamline operations and reduce costs.

He noted that the postal company is trailing the concept of a fully crowdsourced last-mile delivery model for the courier business, to be replicated in suitable locations across the nation.

“Pos Malaysia will also seek further regulatory changes through the National Postal and Courier Industry Laboratory, which should aid in building a sustainable courier sector.

“Pos Logistics, which serves prominent automotive manufacturers, should benefit from the government’s extension for sales tax exemption on cars until June 2021,” he added.

Pos Aviation will continue to be prudent in managing costs as it navigates through this unprecedented challenging period for the aviation industry.

The culmination of the group’s initiatives, as well as continuous operations’ improvement, is expected to result in improved profitability this financial year.

Read our previous report here

Pos Malaysia 4Q financial performance hit by impairments