PosM registered a core net loss of -RM62.7m in 4QFY22 (vs 3QFY22: -RM43.6m; 4QFY21: -RM30.8m), bringing FY22 core net loss to -RM136.3m (vs FY21: -RM179.1m). The results came in below both our (-RM86.8m) and consensus (-RM93.3m) projections. Key variance to our forecast was due to lower-than-expected revenue. We expect improving parcel yields to be offset by falling parcel volumes given (i) major e-commerce players increasingly shifting to in-house delivery capabilities, (ii) competitive last mile delivery landscape. Cut FY23f/24f forecasts to -RM77.1m/RM10m (from -RM8.6m/RM16.2) as we lower the revenue contribution and margin assumption for the Postal segment. TP is subsequently lowered to RM0.56 (from RM0.60). Our TP implies a P/B multiple of 0.65x on FY23f BVPS of RM0.87 (at -1SD below its 3Y mean of 1.17x) as near term outlook remains challenging. Reiterate HOLD.

Below expectations. PosM registered a core net loss of -RM62.7m in 4QFY22 (vs 3QFY22: -RM43.6m; 4QFY21: -RM30.8m), bringing FY22 core net loss to -RM136.3m (vs FY21: -RM179.1m). The results came in below both our (-RM86.8m) and consensus (-RM93.3m) projections. Key variance to our forecast was due to lower-than-expected revenue. FY22 core net loss was arrived at after adding back EIs (predominantly impairment loss of PPE) totalling RM31.4m.

QoQ. Total revenue saw a 5% decline QoQ, as most of its key segments reported weaker contribution (Postal: -9.7%, Logistics: -4.0%, Aviation: -5.1%), with the exception of its Others segment, which has registered a 43.6% growth. We reckon the falling contribution from its Postal segment is due to declining parcel volumes, given the intense competition in the last mile delivery space. In tandem with the falling topline, wider losses from Logistics segment and higher interest expense, core net loss also widened to -RM62.7m, against -RM43.6m reported in 3QFY22. Losses in the Logistics segment was due to high fixed costs that have continued to incur, despite lesser revenue.

YoY. Revenue slid 11.6%, mainly weighed down by its Postal segment, which has recorded a 20.6% decline in terms of revenue contribution. This was a result of lower parcel volume from its contract customer, despite improving average revenue per item. Aviation segment saw slight improvement of 2%, on the back of better in-flight catering business revenue. The disappointing topline and Logistics segment’s performance has led to losses widening to -RM62.7m (vs 4QFY21: -RM30.8m). Losses in Logistics segment was attributed to high fixed costs.

YTD. Despite better showing in both its Aviation (+18%) and Others (+18.2%) segment, revenue still took a 10.6% hit as the lower contribution from the Postal (-18.6%) segment has more than offsets the positives. Improved contribution from the Aviation segment was due to (i) higher cargo tonnage handled, (ii) higher ground handling revenue and (iii) higher in-flight catering business revenue, whereas better performance from its Others segment was lifted by Ar-Rahnu. Weakening contribution from Postal segment was due to the same reason mentioned above. Owing to PosM’s cost rationalisation efforts and the MSS exercise in FY21, core net loss narrowed to -RM136.3m (vs -RM179.1m SPLY).

Outlook. We remain cautious on PosM’s outlook, as we believe the challenging macroeconomic outlook will continue to weigh down on the Group’s recovery prospects. We expect improving parcel yields to be offset by falling parcel volumes given (i) major e-commerce players shifting to in-house delivery capabilities; and (ii) the competitive last mile delivery landscape. E-commerce players cutting back on goodies and promotions to manage costs will inevitably hurt parcel volumes as well.

Forecast. Cut FY23f/24f forecasts to -RM77.1m/RM10m (from -RM8.6m/RM16.2) as we lower the revenue contribution and margin assumption for the Postal segment.

Maintain HOLD, with a lower TP of RM0.56. Post earnings revision, our TP is lowered to RM0.56 (from RM0.60). TP is derived based on a P/B multiple of 0.65x on FY23f BVPS of RM0.87 (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 - 21 Feb 2023