PosNiaga to get a boost. As we highlighted in our 15 June 2012 report, 'Delivering Good News', the group's PosNiaga business will be POSM's next focus area. We also note that under POSM's 5-year strategic plan unveiled on 14 June 2012, its main objective is to become a one-stop solutions provider. Instead of offering only mail delivery services and insurance products at its 700 POs nationwide - which are located not only at various state capitals and major towns but also in small towns and rural areas - POSM is now extending its services by providing more financial products. We believe Pos Ar-Rahnu can be a sizeable business as it will leverage on POSM's 700 POs. This is based on the success of the existing Ar-Rahnu Pawn Broking Scheme currently provided via Agro Bank and Bank Rakyat, which have a much smaller network of 176 and 136 branches respectively nationwide. We think the Ar-Rahnu business will boost PosNiaga's earnings since there could be plenty of low-hanging fruits arising from the difficulties faced by small-time entrepreneurs in obtaining financing from banks in rural areas. Nonetheless, we make no changes to our earnings forecast at this juncture, pending further guidance on the product's take-up rate as well as margins.

Maintain BUY. We continue to like the postal group despite the organic decline in mail volume. This is based on: (i) the high possibility that DRB-HICOM will eventually unlock the value of POSM's 5 land plots as management already has plans for its land plots, especially its sizeable land in Brickfields, (ii) expectations of a bigger contribution from PosLaju to group earnings by leveraging on 1 of the 2 license holders in Malaysia providing ground handling services to foreign airlines, namely DRB's Kuala Lumpur Airport Service (KLAS), to enhance its already lucrative courier business (contributing 21% of revenue in FY12), and (iii) POSM's tie-up with Bank Muamalat and Uni-Asia Life Insurance going forward, which will bolster the retail segment via high-margin fees for over-the-counter transactions at its POs, apart from the existing Shared Banking Services provided on behalf of RHB and Maybank. Maintain BUY, with FV of RM4.14, based on SOP valuation.

Source: OSK