Investment Highlights

• We now project a FY21F net loss of RM62.0mil (vs. a RM0.9mil net profit previously) and a slightly higher FY22F net profit of RM52.1mil (vs. a RM51.1mil net profit previously). In line with our forecast of a turnaround in FY22F, we now use an earnings-based valuation method for Pos Malaysia, i.e. 16x revised FY22F EPS (vs. an assetbased valuation method, i.e. 0.75x P/B previously). Maintain BUY.

• Nonetheless, we cut our fair value (FV) by 20% to RM1.07 (vs. RM1.33 previously). At 16x forward earnings, we value Pos Malaysia at a discount to its peer Singapore Post’s 19x to reflect Pos Malaysia’s tougher competitive landscape in Malaysia.

• Pos Malaysia’s FY20 results disappointed with wider-thanexpected net loss of RM163.7mil vs. net loss forecasts of RM63.0mil of ours and RM55.3mil of market estimates.

• The variance against our forecast came largely from deeper-than-expected losses from: (1) postal services largely due to the temporary shutdown of its main parcel processing centre (70% of total capacity) in Oct–Nov 2020 on the back of the Covid-19 outbreak; (2) aviation due to a collapse in demand on border closure; and (3) logistics due to operational disruptions from the pandemic. In addition, there were one-off provisions comprising goodwill impairment (RM16.2mil) and staff right-sizing (RM41.6mil), offset by gains from the partial disposal of World Cargo Airline Sdn Bhd (RM79.3mil).

• On a brighter note, revenues from postal services rose 8% YoY as the positive impact from the postal tariff hikes effective 1 Feb 2020 more than offset the loss of parcel volume in 4Q as mentioned. The higher revenue from postal services helped to narrow operating loss by 70% to RM95.1mil in FY20 from RM315.4mil in FY19.

• Meanwhile, the logistics segment’s revenue inched up by 3% YoY, mainly driven by higher demand for freight forwarding and haulages, and the rise in automotive production volume from Proton.

• The aviation segment’s revenues dropped by 39% YoY, mainly due to a loss of revenue from ground handling and in-flight catering brought about by flight cancellations globally following the Covid-19 pandemic.

Source: AmInvest Research - 23 Feb 2021