KUALA LUMPUR: Pos Malaysia Bhd is expected to post a turnaround and return to profitability in the near term after announcing a hike in postage rates, RHB Investment Bank said today.
The postal group in an announcement yesterday said the revision would affect commercial customers with stamp rates for commercial mail more than doubling to RM1.30 (from 60 sen) while rates for personal and non-commercial mail users remain unchanged at RM0.60, as of Feb 1.
“Following the rate revisions, we expect Pos Malaysia to return to profitability in the financial year 2021 forecast (FY21F), boosted by a turnaround in earnings for its postal services and international businesses, which registered segmental losses of RM115.7 mil and RM16 mil in the first-half financial year 2020 respectively,” the investment bank said in a note.
It believed that a decline in mail volume would not overshoot relative to current trends, given the relatively minimal cost base for commercial customers.
RHB Investment also foresees the prospect of Pos Malaysia resuming its payout dividends starting from financial FY21F (FY19: 4 sen).
The bank has upgraded Pos Malaysia to Buy from Neutral with a target price of RM1.70 from RM1.40.
Meanwhile, AmInvestment Bank upgraded the counter to Hold from Sell with a fair value of RM1.34 from RM1.27.
“We now project Pos Malaysia to register a smaller net loss of RM9.6 mil in FY20F and a net profit of RM9.8 mil in FY21F versus net losses of RM69.1 mil and RM45.5 mil previously, following an earnings boost from the latest development.
“Nevertheless, we believe the earnings boost from the higher postages will be partially eroded by: the hastened digitalisation of physical mail, resulting in accelerated mail volume contraction; and more aggressive operating expenditure to improve the quality of postal service,” it added. – Jan 29, 2020, Bernama
