PosM reported 1QFY22 core net loss of -RM30.9m (4QFY21: -RM30.8m; 1QFY21: -RM41.9m). We deem the results within our expectations, as we are expecting sequential improvement arising from PosM’s ongoing cost optimisation efforts and transformation journey. However, it was below consensus. That said, we remain wary over PosM’s challenging operating environment, given the (i) intense competition in the last mile delivery space and (ii) the reopening of economy that is causing a shift in consumer purchasing trend from online to physical stores. We now forecast FY22f to register losses of -RM77.4m (from -RM76.0m previously) but we maintain our FY23f forecasts unchanged at RM4.7m. Reiterate HOLD on PosM, with a lower TP of RM0.61 (from RM0.76 previously), based on a P/B multiple of 0.65x on its FY22f BVPS of RM0.94 (at -1SD below its 3Y mean of 1.17x).

Within expectations. PosM reported 1QFY22 core net loss of -RM30.9m (4QFY21: -RM30.8m; 1QFY21: -RM41.9m). We deem the results within our expectations (FY22f: -RM76.0m) but below consensus (FY22f: -RM55.7m). We expect sequential improvement arising from its ongoing cost optimisation efforts and transformation journey. Core net loss was arrived at after deducting EIs amounting to -RM0.5m.

QoQ. Total revenue declined by 8.4%, on the back of weaker contribution from most of its key operating segments (Postal: -7.7%, Logistics: -12.3%, Aviation: -11.2%), with the exception of Others that remained flattish at 0.6%. Despite the weaker topline, core net loss remained flattish at -RM30.9m (vs -RM30.8m), owing to its cost optimisation efforts.

YoY. Top line recorded a 18.6% decline as it was weighed down by the lower revenue contribution from both postal (-24.6%) and logistics (-25.1%) segments, caused by lower overall parcel volume in its postal segment and high base effect in its logistics segment (1QFY21 was boosted by exceptionally high demurrage and detention charge). Nonetheless, it was partially compensated by the improvements in aviation (+31.4%) and others (+21.1%) segments, driven by higher cargo tonnage handled. Despite lower revenue in postal segment, LBT narrowed on the back of lower staff cost and better average revenue per item (ARPI). Aviation segment also returned to black at PBT level, driven by better topline. However, the logistics segment has slipped into losses due to the coal export ban imposed by the Indonesian government, leading to lower number of voyages performed but fixed costs have continued to incur. All in, core net loss narrowed to -RM30.9m (vs -RM41.9m SPLY).

Outlook. Although we are expecting sequential improvements in PosM’s performance, we remain wary over its challenging operating environment, given the intense competition in the last mile delivery space. We note that PosM has been losing market share to another more aggressive competitors. The reopening of economies also does not necessarily augur well for PosM’s postal segment as consumer purchasing trend has shifted from online to physical stores, as evident in the current quarter.

Forecast. Post updating of financial model, we now forecast FY22f to register losses of -RM77.4m (from -RM76.0m previously) and we maintain our FY23f forecasts at profit RM4.7m. We also introduce our FY24f forecasts of profit RM32.7m.

Maintain HOLD, with a lower TP of RM0.61 (from RM0.76), based on a P/B multiple of 0.65x on FY22f BVPS of RM0.94 (at -1SD below its 3Y mean of 1.17x) as near term outlook remains challenging. Reiterate HOLD on PosM.

Source: Hong Leong Investment Bank Research - 26 May 2022