Results

• Within expectations – Reported 3QFY03/17 core net profit of RM24.3m and 9MFY03/17 at RM64.9m, accounting for 75.7% of HLIB expectation and 72.8% of consensus.

Deviations

• None.

Dividend

• None.

Highlights

• YoY: Core PATAMI gained 8.9% YoY in 3Q17 due to (i) stronger courier segment top line caused by strong demand from e-commerce and (ii) maiden contribution of logistics business in 3Q17 (KLAS).
• QoQ: 3Q17 core PATAMI surged almost twofold due to (i) seasonally stronger courier revenue (ii) surge in International volume and (iii) stronger digital certificate business.
• YTD: Cumulative 9M17 core PATAMI rose 19.7% mainly underpinned by (i) stronger courier revenue driven by e- commerce demand (ii) stronger sales of digital certificates (in Others segment) and (iii) contribution from logistics business (KLAS) in 3Q17.
• Comment: While 9M earnings came in within expectation, PosM continued to be affected by the weakness in convention mail volume. Meanwhile, its international transshipments business is relatively seasonal.
• Courier segment remains the anchor for the group’s growth and we believe that it would still be growing at double- digits in 2017.
• Integration of KLAS into the group’s business has given slight earnings boost but material synergistic benefits could only be reaped in the longer run.

Risks

• New services/products fail to mitigate declining mail volume; and
• Sharper-than-expected decline in mail volume

Forecasts

• Maintained

Rating

SELL ↔

• While we are still positive on its long term prospects for e- commerce driven courier business, recent share price surge has more than priced in the near term earnings prospects (27.5x implied FY18 PER).

Valuation

• Maintain SELL with TP maintained at RM3.36 pegged to unchanged 20x FY18 PER.

Source: Hong Leong Investment Bank Research - 24 Feb 2017