Period    3QFY13/9MFY13

Actual vs. Expectations  The 9MFY13 net profit of RM119m came in above ours and market expectations. It exceeded our full year estimate by 3% but made up a lower 83% of the consensus forecast.   

Dividends   No dividends were declared for the quarter.

Key Results Highlights   YTD, the 9MFY13 net profit grew 61% compared to the same period last year, backed by the higher EBIT and other income numbers despite incurring higher operating costs.

 QoQ, the net profit of RM52m was up by 70% mainly on the back of growth in the courier segment. Profit contribution from the mail segment dropped 15% due to the higher operating expenses incurred mainly on staff and transportation costs. Meanwhile, the retail segment continued to report losses due to lower commissions earned from agencies and philately.   

 YoY,  the net profit doubled due to better performance from the courier segment, where the EBIT increased almost three-fold as a result of higher revenue and better margins. In contrast, despite a marginal increase in revenue, the mail segment's EBIT dropped 11% due to higher operating costs. The retail segment recorded a lower operating loss by 33% following higher commissions earned from agencies and philately coupled with its lower operating costs.

Outlook   Management is banking on higher profits from its profitable courier and logistics segment via leveraging on its numerous Pos Laju centres in Malaysia.

Change to Forecasts  We have increased our FY13 and FY14 net profit forecasts by 23% and 21% respectively as we imputed in a higher contribution and margin from the courier and logistics segment. 

Rating    Maintain OUTPERFORM

 We are maintaining our OUTPERFORM call due to the attractive upside (+21%) and decent dividend yield (3%) on the stock.

Valuation    Following the upgrade in our FY13-14 earnings estimates, our DCF-based target price has been increased to RM4.20 from RM3.90 previously. 

Risks   Delays in the execution of its business transformation plan. 

 A sharp increase in the jet fuel price.  

Source: Kenanga