PosM reported 2QFY22 core net profit of RM0.9m (1QFY22: -RM30.9m; 2QFY21: -RM65.3m), bringing 1HFY22 sum to a core net loss of -RM29.9m (1HFY21: -RM107.1m). Its performance was within expectations, vs our FY22f loss forecasts of -RM77.4m and consensus -RM92.2m. While PosM’s has managed to breakeven in 2QFY22, we remain wary over its recovery prospects, given the challenging business environment arising from tough competition in the last mile delivery space. Case in point, PosM has cited a decline in parcel volume from its contract customers during the quarter. We keep our forecasts unchanged, pending more info from an upcoming analyst briefing. Unchanged TP of RM0.61 is derived based on a P/B multiple of 0.65x on FY23f BVPS of RM0.94 (at -1SD below its 3Y mean of 1.17x) as near term outlook remains challenging. Reiterate HOLD on PosM.

Within expectations. PosM reported 2QFY22 core net profit of RM0.9m (1QFY22: -RM30.9m; 2QFY21: -RM65.3m), bringing 1HFY22 sum to a core net loss of -RM29.9m (1HFY21: -RM107.1m). 1HFY22 core net loss was arrived at after stripping out EIs (mainly net foreign exchange differences) amounting to RM5.7m, to its 1HFY22 reported net loss of RM35.6m.

QoQ/YoY. Total revenue improved 6.8% QoQ (on the back of stronger contribution across all of its key operating segments), but declined -3.1% YoY (dragged by lower Postal volume). On the brighter side, PosM managed to breakeven in 2QFY22, at RM0.9m (vs 1QFY22 -RM30.9m; 2QFY21 -RM65.3m). We believe the improvement in its performance was due to management’s cost optimisation efforts, resulting to better margins

YTD. Top line recorded a decline of -11.3%, dragged by the weaker showing in its Postal (-16.6%) and Logistics (-15.3%) segment, partially offset by the stronger contribution from its Aviation (+19.8%) and Others (+22.4%). Lower revenue contribution from Postal segment was due to parcel volume decline in its courier business, while weaker contribution from Logistics segment was mainly due to high base last year (1QFY21 recorded exceptionally high demurrage and detention charge of RM19.1m) and effects of coal export ban by Indonesia. On PBT level, the Postal segment saw the strongest improvement, as losses narrowed by RM80m to LBT of -RM24m, owing to (i) lower transportation and delivery cost, (ii) lower staff cost as a result of Mutual Separation Scheme exercise, and (iii) better products yield that led to higher average revenue per item. All told, core net loss narrowed to -RM29.9m (vs -RM107.1m SPLY).

Outlook. While PosM’s transformation programme has started to bear fruit, helping the Group breakeven in 2QFY22, we remain wary over its recovery prospects, given the challenging business environment arising from tough competition in the last mile delivery space. Case in point, PosM has cited a decline in parcel volume from its contract customers. The stiff competition is also exacerbated by major e-commerce players increasingly leveraging on their insource delivery capabilities.

Forecast. Keeping our forecasts unchanged for now, pending more fresh updates at the forthcoming analysts briefing.

Maintain HOLD, with an unchanged TP of RM0.61. TP is derived based on a P/B multiple of 0.65x on FY23f 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 - 23 Aug 2022