Pos  Malaysia  posted  strong  9MFY13  earnings,  with  a  cumulative  core  net  profit  ofRM112.9m  (YTD:  +48%,  q-o-q:  71%,  y-o-y  for  3QFY13:  119%),  in  line  with  our estimates  but  again  beat  consensus  forecasts.  The  commendable  growth  was mainly led by the courier segment and a smaller-than-expected natural drop in mail revenue. The performance of the group was also buoyed by lower retail cost. Given the positive outlook, we maintain our BUY call, with our RM4.14 FV unchanged.

More good numbers. Pos Malaysia posted strong 3QFY13 results, reporting a net profit of RM51.7m (+71% q-o-q, +119% y-o-y, +48% YTD) on the back of 4.3% q-o-q and 8.2% y-o-y  revenue  growth  (YTD:  +6.4%).  The  9M  cumulative  core  net  profit  of  RM112.9m  was  in line  with  our  expectations  but  trumped  consensus  estimates,  accounting  for  70%/82%  of the respective full-year earnings forecasts. The upcoming quarter is a traditionally stronger q-o-q, with the festive season expected to drive up its courier and mail volumes.
 
Courier segment sees rapid growth. The courier segment chalked up a robust 25.9% q-o-q and 188% y-o-y growth in operating profit toRM21.9m in 3QFY13 on the back of 17% q-o-q  and  34.1%  y-o-y  increases  in  revenue.  The  numbers  were  buoyed  by  higher  sales from  on-demand  customers,  contract  customers,  parcels  and  express  mails  due  to  brisk online business transactions as well as extended operating hours. While mail revenue grew by 1.6% q-o-q and 0.4% y-o-y, the division's profit margin slipped 1.7 ppts y-o-y to 14.1% due  to  higher  operating  expenses,  notably  for  staff  and  transportation.  Meanwhile, shrinking  operating  costs  amid  strict  cost  discipline,  coupled  with  higher  agency commissions,  reduced  overall  losses  at  the  retail  segment.  Note  that  due  to  the  high allocation for staff and operating expenses, it is a norm to see the retail division in the red.

Maintain BUY. We think the company's outlook remains positive as it diversifies its income sources amid a declining mailing segment. Its retail portion is also gaining pace, driven by growth  in  its  pawn  broking  and  other  agency  services.  That  said,  we  retain  our  earnings forecasts and RM4.14 FV. Our sum-of-parts valuation incorporates the value of the group's landbank.  Based  on  the stock's  last  closing  price,  our  FV  still  offers  a  potential  upside  of 19%. Maintain BUY.

Source: OSK