News

• On 4th May 2017, POS has entered into Memorandum of Collaboration (MOC) with Lazada Malaysia (wholly owned by Alibaba Group)
• The MOC showcases the intention of POS and Lazada collaborating on the development of an e-Commerce Regional Distribution Centre (e-RDC) located in the old LCCT terminal in Sepang, Selangor.
• E-RDC is envisioned to be a one-stop solution centre in providing services including air-sea-land transport, international transhipment, courier services and warehousing, catering for Lazada’s customers in Malaysia and ASEAN region.
• The MOC will expire 12 months from 4th May 2017 or upon execution of definitive agreements between POS and Lazada Malaysia. Financial Impact
• This is a big positive for POS as Lazada is the biggest e- commerce marketplace player in ASEAN region. The successful execution of this collaboration would propel strong growth for the group’s courier, transhipment, logistics (KLAS) and warehousing divisions in the long term.
• Investment in infrastructure of the warehouse in LCCT would be borne by POS, amounting to RM60m while Lazada would support with its e-Commerce expertise, handling of items and training.
• Out of the 430,000 sq ft leased by POS from MAHB, 330,000 sq ft would be utilised for Lazada’s distribution centre. Renovation works would start soon and operations are scheduled to commence on 31st Aug 2017.
• We believe the positive earnings impact would only be realised earliest in FY19 and it could take time for the group to fill up the new warehousing capacity to its optimal utilisation.

Forecast

• Maintain forecast.

Rating

HOLD (↔)

• Collaboration with Lazada (and Alibaba) marks POS’s significance into the market potential of e-commerce in ASEAN region. We believe POS would be the primary beneficiary of the potential e-commerce boom given that it’s the largest courier player in Malaysia. However, valuation seems to have run ahead of its earnings at FY19 PER of 20.1x, similar to Sing Post (20x).

Valuation

• TP is raised to RM6.08 (from RM4.80) pegged to unchanged target PER multiple of 25x, as we roll forward our valuation to FY19 to better reflect its long term earnings potential. Maintain HOLD.

Source: Hong Leong Investment Bank Research - 08 May 2017