POS Malaysia Bhd (PosM) saw its postal segment reporting results above expectations, according to RHB Investment Bank, with the turnaround attributed to a surge in courier volumes.
PosM had reported a core net loss of RM25 mil for the second quarter of its 2020 financial year ended June 30 2020, which is narrower-than-expected, due to its postal segment turning profitable, according to RHB analyst Lester Siew.
However, the narrowed loss was offset by the group’s aviation and logistics segments, which were affected by the pandemic lockdown.
“PosM’s 2020 first half core net loss amounted to RM52 mil, which we deem to be above expectations, as we project PosM to deliver a profit in 2H20.”
“We attribute the earnings beat to a lower-than-expected decline in mail volumes despite the imposition of commercial mail tariff hikes in February, with mailing revenue dipping only 3% quarter-on-quarter (qoq) in 2Q20,” said Siew.
The analyst also noted that the postal segment turning profitable was underpinned by mail volume, as well as a 57% surge qoq in courier volumes in 2Q20, though this was partially dragged by its retail business, which was briefly halted during the movement control order (MCO).
“Meanwhile, PosM’s international business also saw a strong rebound following a recent
transshipment pricing review and acquisition of new clientele. Overall, the headline losses in 2Q20 were led by the aviation and logistics segments which were adversely impacted by the lockdown, particularly for the former.”
“Nonetheless, the said affected businesses should subsequently pick up following the easing of lockdown restrictions and broad resumption of economic activities,” said Siew.
The analyst also believes that PosM could approach break-even level in 3Q20 before posting a return to profitability in 4Q20, premised on a gradual recovery of its non-postal businesses, sustained growth in parcel deliveries, as well as the realisation of cost-down initiatives.
RHB maintains a buy call on PosM and a target price of RM1.10, continuing to favour its turnaround momentum, supported by the positive momentum of its postal businesses, as well as the group’s ongoing efforts to trim its elevated cost base.
At the end of the trading day, PosM’s shares were last done at 91.5 sen, up 1.5 sen, with 3 million shares traded. – Aug 26, 2020
