Our  meeting  with  Pos  Malaysia  (POSM)’s  management  yesterday reaffirmed  our  bullish  view  on  the  company.  POSM  has  taken  extra steps to solidify its market leadership. Backed by a solid balance sheet, it  is  now  aggressively   spreading  its  new wings. Management believes that  the  impact  from  the  fuel  price  hike  is  minimal  although  we  have earlier cut our forecast to be prudent. Maintain BUY, with MYR6.10 FV.

- All  intact.  We  remain  upbeat  on  POSM’s  outlook  following  a  meeting with management yesterday. All its expansion plans are on track and we believe  its  growth  remains  intact, buoyed by strong growth in its supply chain solutions unit, formerly known as the courier division.

- New  initiatives  to  improve  earnings  power.  The  company  has successfully retained  its leadership in its traditional  businesses,  while at the  same  time  taken  steps  to  further  improve  its  earnings  power  by offering  new  initiatives  that  yielded  positive  returns.  These  include:  i) rolling  out  Pos  Hayat  and  Pos  Bestari  Life  insurance  under  its  Pos Assurance  arm,  ii)  expanding  its  Ar-Rahnu  business,  iii)  providing logistics  services,  iv)  capitalising  on  its  vast  post  office  networks nationwide,  v)  providing  value-added  services  to  clients  through postmen,  and  vi) expanding  Direct  Mail  services  to  curb  the  decline  in mail volume.

- New  innovative  solutions.  To  further  improve  its  profitability,  POSM aims to roll out  more new services, such as: i) parcel lockers, ii) PosLaju kiosks,  and  iii)  an  integrated parcel centre  (IPC)  to automate its parcel handling processes, which is currently under construction.

- Maintain BUY.  We peg  POSM  to  a  18x FY14F P/E,  which is  at  a  13% premium  over  Singapore  POST  (SPOST  SP,  NR).  We  think  this  is justifiable  as we believe  POSM has larger  growth  potential compared to SPOST,  whose  current  business  model  is  approaching  the  maturity stage

Source: RHB