POS Malaysia (POSM)’s FY13 results came in softer than our and street estimates. Its mail segment recorded decent growth but the courier and retail segments were hit by higher staff costs. Nonetheless, growth is still strong and we remain positive on the company’s outlook.  We raise our FV slightly to MYR5.20, based on  15x FY14F P/E, which is still at a 15% discount to SingPost. Maintain BUY.

- Results below street estimates. POSM’s FY13 core net earnings of MYR144.9m (+24.1% y-o-y) were below our and consensus estimates although its revenue was in line with our projection. On a quarterly basis, its mail segment recorded a decent growth of 63.7% y-o-y in gross profit mainly due to higher contribution from its new product, direct mail. However, its courier division reported a gross loss of MYR0.2m (>-100% y-o-y) despite a 5.3% y-o-y revenue growth. This caught us by surprise. The loss was mainly attributed to higher staff and transfer costs, which had surged by 40.6% and >100% during the period. Its retail segment (-7.3% y-o-y) was also hit by higher operating costs, which we believe was partly due to the steeper start-up costs for its  Ar Rahnu outlets in the 
rural/suburban areas.

- Overall performance still positive. Although the earnings were below our expectation, a 24.1% y-o-y growth is nonetheless still a strong improvement. Revenue from its courier segment also met Management’s target of hitting MYR300m in FY13. We still believe that POSM is poised for stronger growth in the future as it is expanding in line with its five-year Strategic Plan unveiled in 2012. We expect its mail segment to improve, its courier services to return to the black and more Ar Rahnu outlets to be set up. In addition, POSM has several M&A proposals on its desks which may eventually add value to the company in the future. It intends to expand into logistic services.

Source: RHB