About circumventing over-crowded courier service space

WHILE the latest move by the Malaysian Communication and Multimedia Commission (MCMC) to issue a two-year moratorium on the issuance of courier service licence from Sept 14 this year to Sept 15, 2022 spells good news to existing courier service players, cut-throat competition remains an uphill battle for players in the parcel delivery segment.

On one hand, AmBank Research views the latest development as mildly positive for industry players which include Pos Malaysia Bhd as this puts a stop to the entry of new players (although aspiring players could still gain entry via the acquisition of existing players).

On the other hand, it cautioned that in the absence of a major consolidation, the playing field remains crowded with 109 courier service licensees in Malaysia.

“We believe the new norms (accelerated digitalisation, social distancing, proliferation of online shopping, etc.) in the aftermath of the COVID-19 pandemic are positive to the parcel delivery segment (of which Pos Malaysia is one of the top three players in Malaysia),” noted AmBank Research in a company update.

“However, this is offset by an overly crowded playing field with cut-throat competition resulting in razor-thin margins.”

During the moratorium period, MCMC will not accept any new licence application for all categories of courier services.

It will also draft a new action plan via the National Postal and Courier Industry Laboratory (NPCIL) to support the strategic development aspirations of the new postal and courier industry in addition to publishing a report in end-November.

Such move will give more clarity on the future prospects of the segment moving forward.

Elsewhere, AmResearch is also wary that Pos Malaysia – like all other global postal service providers – is fighting a losing battle in the dying snail mail business.

“In order to survive, they need to (1) cut cost and (2) reinvent,” reckoned the research house, noting that Pos Malaysia’s hands are tied given its unionised workforce.

As for Pos Malaysia’s courier segment, AmResearch described it as a “reinvention that has an advantage over its competitors given its extensive legacy post office network”.

“However, the segment is weighed down by cut-throat competition as mentioned,” added the research house.

All-in, AmBank Research maintained its “hold” rating on Pos Malaysia with a fair value of 90 sen.

At 10.15am, the counter was up half a sen at 88.5 sen with 574,300 shares traded, thus giving it a market capitalisation of RM693 mil. – Oct 27, 2020

 

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