News

• Yesterday, Pos signed a collaboration agreement with Tigers Global Logistics (M) Sdn. Bhd (Tigers), subsidiary of a Hong Kong based e-Fulfilment business solutions company to offer Malaysia’s first cross-border e-Fulfilment business solutions within the Asia Pacific region.
• Tigers is a global logistics and transportation company that specialises in supply chain solutions, e-Fulfilment and transportation by air, sea and road.
• Concurrently, the collaboration agreement also sees the establishment of the first ever Regional e-Fulfilment Hub in the country where it will be used to manage office of exchange, air conveyance and e-Fulfilment capabilities.
• The hub which is located nearby Low Cost Carrier Terminal in Sepang is expected to benefit both international and local e-Commerce players and customers across 30 countries in the Asia Pacific region. Financial Impact
• Overall, it is a positive for the company as it marks its 1st step into helping Malaysia to become a regional e-commerce distribution hub in the ASEAN region while its overall integrated logistics business would benefit as a result.
• Pos Malaysia would utilise most of its business functions (customs clearance, product handling, pick & pack, warehousing as well as last mile delivery) for the collaborations whereas Tigers would provide the regional database, network and system integration for seamless logistics operations.
• Now the collaboration is still at its early stage therefore we believe contribution from this would be minimal in FY17 but in FY18 we expect revenue contribution to be circa RM30-40m (1-2% of group revenue) when the volume pick up.
• At full swing, revenue per annum from this collaboration would go up to RM100m gradually in the longer term.

Forecast

• Maintain forecast.

Rating

HOLD (↔)

• Long term prospects of the company remains intact with e- commerce set to drive its growth in courier businesses. However, we believe that it is priced in at its current share price and its current restructuring and expansion would bear fruit only in the longer term.

Valuation

• TP is maintained at RM4.80 pegged to unchanged target FY18 PER multiple of 25x.

Source: Hong Leong Investment Bank Research - 06 Apr 2017