Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on February 28, 2018

KUALA LUMPUR: Pos Malaysia Bhd’s share price lost its ground after announcing a 72% year-on-year (y-o-y) drop in net profit for the third quarter ended Dec 31, 2017 (3QFY18).

The postal group’s share price sank as much as 23.13% or RM1.33 to an intraday low of RM4.39 yesterday. The stock closed at RM4.42, down 57 sen or 11.42%, from the previous day’s closing of RM4.99.

Pos Malaysia, once the favourite counter for exposure to the logistics industry, in fact tumbled 24% from its peak of RM5.75 in May. However, over the past 12 months, the counter has gained about 2.7%.

Kenanga Investment Bank Bhd (Kenanga Research) has maintained its “market perform” call with a lower target price of RM5. The research outfit said Pos Malaysia’s weaker third-quarter results came in below expectations, mainly from lower margins in its courier segment, which led to a squeeze on margins.

“Pos Malaysia’s earnings outlook is heavily reliant on its courier segment’s growth, which in turn is largely expected to benefit from the growing e-commerce industry.

“However, [the] looming pressure [on] margins from increasing industry competition could be a challenge at this current juncture,” Kenanga Research analyst Steven Chan said in a note review yesterday.

Hong Leong Investment Bank (HLIB) Research said it is still positive on the long-term prospects for Pos Malaysia’s e-commerce-driven courier business, but it opines that Pos Malaysia’s share price has more than priced in the near-term earnings prospects.

The national postal service provider has seen lower revenue coupled with higher operational costs. Its net profit dropped sharply to RM9.48 million in 3QFY18 from RM33.41 million last year. Quarterly revenue was lower by 2% to RM620.72 million compared with RM635.72 million a year ago.

For the cumulative nine months, the group’s net profit fell 11% to RM64.22 million versus RM71.99 million last year. Revenue, however, was higher by 26% at RM1.82 million compared with RM1.45 million a year ago.

Nonetheless, some investment analysts remain upbeat on its prospects. An analyst said Pos Malaysia is expected to be among the direct beneficiaries of the Digital Free Trade Zone (DFTZ), a government initiative in the regional logistics hub.

“We cannot deny that e-commerce is booming and [the] DFTZ is likely to be a catalyst that is going to drive Pos Malaysia’s [earnings] going forward,” he told The Edge Financial Daily.

“Of course we would like to buy [Pos Malaysia] at the lowest PE (price-earnings ratio) if possible, but at the same time, you have to see what is reasonable for the logistics industry. I think Pos Malaysia, at the current price, is reasonable. It is not super expensive,” the analyst added.

      Print
      Text Size
      Share