Logistics: We believe the parcel delivery segment is a winner of the current situation as the pandemic and the resultant social distancing accelerate the change in shopping habits of consumers from physical to online channels. Based on research data by e-commerce ecosystem player Commerce.Asia, the value of merchandise sold via e-commerce in Malaysia surged 149% YoY in 1Q2020 amidst the pandemic. The growth in e-commerce sales translates to rising volumes of parcels handled by parcel delivery companies such Pos Malaysia (SELL, RM0.58) and GDex (Unrated). However, the sector has low entry barriers. A crowded playing field (with 116 players as at March 2020) has given rise to cut-throat competition resulting in severe squeeze in margins. Meanwhile, in order to achieve better economies of scale, players are expanding their capacity. For instance, Pos Malaysia plans to double its daily automated parcel processing capacity, currently at 500K, by 2025. On the other hand, Pos Malaysia has suspended its international mail and parcel services to most of its destinations for more than four weeks due to the cancellation of flights and airport closures. The disruption to global logistic supply chain has also hurt Pos Malaysia’s other business units such as the international segment (which handles direct entry or transshipment of mails/parcels from other countries), logistics segment (which provides haulage services, warehousing and distribution services) and aviation segment (which includes cargo and ground handling and in-flight catering). Again, we are more inclined to expect only a gradual recovery in these business units as their customers may not have survived the current downturn, and even if they do, they could have scaled down their operations permanently. We project Pos Malaysia’s mail volume to drop by 35% in FY20F (vs. a contraction in the teens in FY19 based on our estimates). We expect the decline in commercial mail volume to accelerate further with businesses stepping up on cost-cutting initiatives and business consolidation amid the economic downturn.