Friday 29 Mar 2024
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KUALA LUMPUR (June 16): Pos Malaysia Bhd is expected to continue registering losses in the second quarter ending June 30, 2020 (2QFY20) due to the movement control order's (MCO) impact on the group's businesses.

Although the MCO has led to a business volume surge in Pos Malaysia's courier service under the group's postal segment, Hong Leong Investment Bank Bhd analyst Nazira Abdullah said in a note today that earnings from this segment, which accounts for 30%-35% of total revenue, will not be able to offset losses from other operations that were halted during the MCO.

"These include Pos’ commercial and retail services, coupled with flight restriction that impacted its aviation and international segments. We expect Pos to register continued losses in 2QFY20, owing to the full brunt of the MCO.

"Moreover, due to low entry barriers of e-commerce industry, as well as increasing number of logistics players in the market (with 116 players as at Mar 2020), we reckon that their margin will be compressed. Furthermore, the recent tariff hike could further deteriorate the mail volume with business stepping up on cost-cutting measures amid recessionary concerns," Nazira said.

Yesterday, Pos Malaysia reported that its 1QFY20 recorded a net loss of RM49.22 million, on a revenue of RM558.53 million.

Kenanga Investment Bank Bhd analyst Raymond Choo Ping Khoon, in another note, wrote that given Pos Malaysia's inability to close post offices, combined with its unionised workforce and losses in the postal services segment, losses are only expected to continue moving forward.

"The courier business will continue to operate in a competitive environment pressured by price and cost challenges. The group is continuing with its efforts to manage cost, whilst increasing operating efficiency," Choo said.

RHB Investment Bank Bhd, meanwhile, expects Pos Malaysia's losses to be reversed in 2HFY20 on business activity normalisation and strong growth momentum in its courier segment.

However, its analyst Lester Siew said the research house believes Pos Malaysia's aviation segment will remain under pressure this year due to reduced air traffic.

"Meanwhile, the group’s tight liquidity position is expected to be alleviated with the disposal of certain non-core assets, including its Islamic pawnbroking business (Pos ArRahnu).

"We believe losses could widen in 2QFY20 (the second quarter) due to further revenue shortfall during the extended MCO period. On the other hand, this is expected to be mitigated by a surge in courier volume, with 590,000 average daily parcels recorded in April (+72% versus 1QFY20’s daily average of 343,000), supported by 60% and 176% increases in users and shipments respectively through its SendParcel online platform.

"The group also saw a strong recovery in transshipment volume, following the resumption of business in China," he said.

Pos Malaysia's share price closed up 4.5 sen or 4.74% at 99.5 sen today, for a market value of RM778.87 million.

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