Pos Malaysia reported stellar  earnings of RM30.3m for 2QFY13,  up by 9.4%  y-o-y and  16.6%  YTD,  in  line  our  forecast  but  slightly  above  consensus.  The  revenue growth in its retail and courier segment continued to offset the drop in the mailing segment as overall revenue grew 5.6% YTD. Its new management's focus on cost led  to  an  overall  improvement  in  EBITDA  and  PBT  margins.  We  are  maintaining our  earnings  projections  and  leaving  our  FV  unchanged  at  RM4.14.  The  stockcontinues  to  be  attractive  at  a  PE  of  9.7x  on  FY13  earnings  and  a  net  dividend yield of 6.8%. Maintain BUY.

Exceeding  expectations.  POS  reported  stellar  earnings  of  RM30.3m  for  2QFY13,  up by  9.4%  y-o-y  and  16.6%  YTD  on  the  back  of  2.7%  y-o-y  and  5.6%  YTD  revenue growth.  However,  q-o-q  earnings  dipped  2.1%  as  revenue  fell  3.5%  q-o-q  during  the seasonally slower quarter coinciding with the Hari Raya slowdown. As of 1HFY13, POS' earnings are in line with our forecast of RM163m but slightly above consensus' earnings forecast  of  RM137m  as  2H  is  a  typically  stronger  period  for  postal  service  providers.  The group has declared a dividend of 6 sen per share.
 
Decline in mail offset by growing retail and courier business. The revenue growth of 5.6% YTD was attributed to better performance in the retail segment (y-o-y: 19.7%, q-o-q: 6.6%, YTD: 15%) as the number of postal transaction services provided at its postal offices continued to expand. Courier revenue also grew,  offsetting the natural decline in mailing revenue.

New management focused on cost efficiency. The entry of a new management team has  led  to  overall  margin  improvements,  notably  on  the  administrative  side  and  the courier  segment.  This  resulted  in  the  overall  expansion  in  1HFY13  EBITDA  and  PBT margins by 2.9ppts and 3.1ppts y-o-y respectively.

Outlook still looking favorable. We continue to be optimistic on the company's outlook as  it  diversifies  its income base  away  from  the  declining  mailing  segment.  The  group's retail  portion  is  picking  up  as  the  range  of  transaction  services  provided  at  its  outlets expands, while its efficiency in providing those services improves.

Maintain  BUY.  We  maintain  our  earnings  projections,  and  are  leaving  our  FV unchanged at RM4.14, based on a sum-of-parts valuation which incorporates the value of POS' land bank. Our FV implies a 13x PE multiple, which is at a discount to its peers' average of 15x. POS is currently trading at an attractive PE of 9.7x on FY13 earnings, further enhanced by its net dividend yield of 6.8%. Maintain BUY.

Source: OSK