We remain upbeat on POSM’s outlook following its briefing for analysts yesterday.  All  business  segments  saw  commendable  growth  in  FY13 while the group’s expansion plans are on track. We expect the company to  take  its  expansion  a  step  further  by  developing  its  landbank, embarking on M&As and enhancing efficiency in its core business. We now  value  POSM  at  a  slightly  higher  17x  FY14f  P/E  as  well  as  higher MYR6.00 FV. Maintain BUY.  
 
- Staying bullish. Although POSM’s share price has rallied strongly YTD, we  are  still  positive  on  the  stock  as  all  its  core  business  segments  are showing encouraging improvements:

   - Mail  segment:  Strong  demand  for  corporate  mail  and  direct  mail services has capped the downtrend in mail volume.

   - Courier segment: Continues to be the company’s main growth driver as it expands into the logistics services business.

  - Retail segment: Capitalizing on its vast network and reach, POSM is charging  higher  commissions  on  several  over-the-counter transaction services performed  by its branches. Also, the Ar Rahnu service it currently provides will continue to be the main growth  fuel for this segment in view of the expansion in outlets.

- Expanding as planned. With POSM’s five-year strategic transformation plan  on  track,  we  expect  to  see  the  group  embark  on  more  aggressive expansion  moves  going  forward.  Some  of  these  may  include  potential development  of  its  valuable  landbank,  more  M&As  to  expand  its business, as well as beefing up its core business.

- Maintain  BUY,  higher  MYR6.00  FV.  We  are  pegging  POSM  at  a  17x FY14F  P/E  (from  15x  previously),  on  par  with  Singapore  Post  (SPOST SP, NR). We deem such a premium valuation justified since POSM’s net of cash P/E is at a 19% discount to SPOST (POSM has 93 sen net cash per share). Reiterate BUY on the stock, with our FV revised upwards to MYR6.00 from MYR5.20 previously.

Source: RHB