Pos Malaysia - Losses Narrow Further

Date: 26/08/2020

Source  :  HLG
Stock  :  POS       Price Target  :  1.20      |      Price Call  :  BUY
        Last Price  :  0.935      |      Upside/Downside  :  +0.265 (28.34%)

PosM’s 2QFY12/20 core net loss of -RM8.2m has tapered down and brought 1HFY12/20 core net loss to -RM35.0m. We deemed this to be inline as we expect a recovery in 2H. Overall, the improved performance was contributed by higher courier volume, increase in tariff hike, higher business contribution from its logistics segment as well as higher other segments. We expect a better 2H owing to better contribution from these segments. Maintain our forecast and reiterate our BUY call with unchanged TP of RM1.20.

Within expectations. 2QFY12/20 core net loss of -RM8.2m (1QFY12/20: -RM26.8m; 1QFY03/20: -RM9.7m) brought 1HFY12/20 core net loss to -RM35.0m (from RM45.3m SPLY). We deemed this to be inline as we expect a recovery in 2HFY12/20 (we projected loss of -RM13.1m loss for the full year whilst consensus was at -RM53.0m loss).

EIs in 2QFY12/20. During the quarter, we added back a net +RM10.8m worth of EIs from PosM’s reported net loss of -RM19.0m. Key adjustments were mainly from RM17.9m for net loss on impairment receivable and RM3.1m on impairment loss of PPE, however, it was slightly offset by gain in forex exchange difference of RM9.4m.

QoQ. 2QFY12/20 revenue increased by 8.5% contributed by higher postal segment (+21.9%) pursuant to the stronger demand from e-commerce and the postage rates revision effective 1 Feb 2020. Other segment also showed an increment of 7.1% coming from higher revenue of digital certificates and ArRahnu businesses. Nonetheless, its logistics and aviation segment showed a decline of -11.6% and -50.0% respectively due their business bearing the full brunt impact of Covid-19 and restricted movement. Overall, losses narrowed to -RM8.2m from losses of -RM26.8m.

YoY. 2QFY12/20’s top line rose by 5.8% mainly from higher revenue from postal segment (+17.7%), logistics segment (+5.8%) and others segment (+6.5%). Postal and other segment were higher due to reasons mentioned above while logistics segment was higher due to higher freight management business and automotive supply logistic business. Nevertheless, its aviation segment decreased by 58.4% due to lower ground handling and in-flight catering pursuant to flight cancellations in the wake of COVID-19 pandemic where international borders are mostly closed. Sequentially, PosM’s core net loss has tapered down to -RM8.2m from -RM9.7m in the same period a year ago.

YTD. 1HFY12/20’s revenue remained flat (-0.3%) at RM1,164.6m mainly from higher postal (+4.3%), logistics (+4.5%) and others segment (+2.7%); however, it was offset by aviation segment (-33.0%) due to impact of Covid-19 and closed borders. However, PosM’s 1HFY12/20 core net loss has narrowed to -RM35m from -RM45.3m SPLY, owing to the improved margins of Postal segment following the rate hike and improved courier volume.

Outlook. We reckon PosM will do better in 2H contributed from their postal and logistics segment. The postal segment will benefit from high courier volume (with the “new normal” in place as people spend less time shopping outside and opt for courier services instead) and full impact of tariff revision for postage. We expect a better contribution from logistic segments, driven by PENJANA stimulus as positive impact from the automotive industry. Management also shared that the company has achieved its first monthly profit in June 2020 and we expect it to sustain in 2H.

Forecast. Maintain forecast as results were in line.

Maintain BUY, with an unchanged TP: RM1.20, based on a P/B multiple of 0.65x on FY20 BVPS of RM1.84 (at -1SD below its 3-year P/B mean of 1.17x) in anticipation of a recovery ahead. We believe the negatives have been priced in for PosM. Furthermore, the recent tariff hike as well as surge in e-commerce demand in the “new normal” could contribute to PosM’s earnings, coupled with spill over positive effect from the automotive industry to their logistics sectors.


Source: Hong Leong Investment Bank Research - 26 Aug 2020

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