Results

• Below expectations – Reported 4QFY03/17 core net loss of RM0.04m and 12MFY03/17 core net profit of RM64.9m, accounting for 80.1% of HLIB expectation and 72.4% of consensus estimate.

Deviations

• Larger than expected loss from Postal services division.

Dividend

• None.

Highlights

• YoY: Posted core loss of RM0.04m in 4QFY17 against RM15.3m profit in 4QFY16 mainly due to losses from postal services division on the back of drop in traditional mail volume as well as lower retail sales from weaker unit trust contribution. The double-digit topline growth in courier division helped to partially offset the losses in postal services.

• QoQ: Core loss of RM0.04m against profit of RM24.3m in 3QFY17 mainly driven by (i) wider losses from postal services (ii) lower courier volume due to seasonality and (iii) losses from Logistics division (KLAS).

• FY17: Core profit weakened by 6.7% dragged by significantly high losses from the postal services division attributable to weak mail volume as well as higher losses from retail division.

• Comment: Pos continued to be affected by the weakness in convention mail volume and weak retail division.

• The group’s long term future prospects hinges on the growth of its e-commerce related logistics and courier businesses.

• Recently announced MOC with Lazada has opened up potential for the group to piggyback on e-commerce growth in Malaysia in conjunction with the launch of Digital Free Trade Zone (DFTZ).

Risks

• New services/products fail to mitigate declining mail volume.

Forecasts

• FY18 forecast is fine-tuned slightly by +2% post full year bookkeeping adjustments.

Rating

HOLD ↔

• E-commerce would anchor its long term growth as it would be the primary beneficiary of the E-commerce boom. However, valuation has ran ahead with FY18 PER at 28.2x, higher than Sing Post of 20.1x FY18 PER.

Valuation

• Maintain HOLD with TP unchanged at RM6.08 based on 25x target FY18 PER.

Source: Hong Leong Investment Bank Research - 24 May 2017