Pos Malaysia: A long metamorphosis Underweight

We downgrade Pos Malaysia (Pos) to an UNDERWEIGHT with a lower DCF-based fair value of RM2.70/share (WACC: 8.6%, terminal growth rate: 1.5%) from RM5.27/share previously. Our FV has an implied FY20 PE multiple of 24.8x and PB multiple of 1.06x. Its comparable GD Express Carrier (GDex) is trading at a forward PE of 50.7x and PB of 4.4x.

Our resumption of coverage on Pos also opens our coverage on the sector of ecommerce, which will be our emphasis for this stock. The group’s e-commerce business has experienced strong growth (3-year CAGR of 18% to FY18) but faces increasing headwinds from competition, an absence of pricing power to defend its margins and slow results from reforms to improve the service quality by eradicating various legacy issues.

Others:

Eastern & Oriental: 1HFY19 core profit up 9.5% YoY; expects stronger 2H Buy

Malaysia Pacific Industries: Braving through the storm Buy

Sapura Energy: Mutually beneficial strategic partnership with OMV Buy

QUICK TAKE

Plantation Sector: News flow for week 5 – 9 Nov Neutral

NEWS HIGHLIGHTS

Insurance Sector: Great Eastern confirms participating in health plan for the poor

Tatt Giap: Gets new shareholder

PPB Group: An indirect casualty of tit-for-tat trade spat

E-Commerce: Alibaba Singles' Day tops US$30 billion but growth rate plunges

Source: AmInvest Research - 12 Nov 2018