POS Malaysia Bhd’s parcel delivery segment is expected to face more headwinds despite a rise in online shopping, due to an overcrowded playing field, according to AmInvestment Bank.
“We believe the new norms – accelerated digitalisation, social distancing, and proliferation of online shopping – 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.”
However, AmInvest noted that this positive is offset by an overly crowded playing field with cutthroat competition, resulting in razor thin margins.
This comes following the temporary suspension of Pos Malaysia’s outbound international mail, parcel and Express Mail Service (EMS) services to all international destinations starting Aug 3, with Singapore being the only exception.
This, AmInvest said, is due to borders remaining mostly closed around the world, which limits the availability of international flights and full-fledged airport services.
The research house also noted that international mail and parcel services made up about 15% of Pos Malaysia’s revenue before Covid-19.
This also marks the second suspension of Pos Malaysia’s international mail and parcel services this year, with the first taking place on March 30.
The March 30 suspension saw services stopped to most destinations, except China, Hong Kong, Japan, Singapore, and the UK, but services resumed to several locations two weeks later.
In the meantime, AmInvest noted that Pos Malaysia will maintain its AsiaXpress international courier services, but only at selected post offices and Pos Laju centres for the delivery of international mail and parcel.
The research house also noted that postal service providers worldwide have to find a solution to the slow death of regular mail.
“Postal service providers around the global, Pos Malaysia included, are fighting a losing battle in the dying snail mail business. In order to survive, they need to cut costs and reinvent. We believe Pos Malaysia’s hands are tied given its unionised workforce.
“Meanwhile, its courier segment could be considered a reinvention, and Pos Malaysia has an advantage over its competitors given its extensive legacy post office network. However, the segment is weighed down by cutthroat competition as mentioned,” said AmInvest.
The research house maintains a hold call, and marks Pos Malaysia with a fair value of 90 sen, with the belief that the scaled down operations of Pos Malaysia’s international services has been adequately reflected.
At 11am, Pos Malaysia’s shares were last done at 90.5 sen, down 8 sen, with 3.26 million shares traded. – Aug 3, 2020
