KUALA LUMPUR (July 29): Pos Malaysia Bhd told analysts that its second quarter losses could have narrowed by half from the preceding first quarter as the company contends with the Covid-19 pandemic-driven movement control order (MCO) in Malaysia, according to Hong Leong Investment Bank Bhd (HLIB) today.

HLIB analyst Nazira Abdullah, who attended a recent meeting with Pos Malaysia, wrote in a note today the group remains conservative and suggested that a breakeven may not be possible in current financial year ending Dec 31, 2020 (FY20) as the company's aviation segment may still drag down the group's earnings.

"However, on a core level, we believe that core loss will be about the same as 1QFY20 as we have excluded RM22.4 million worth of EIs (extraordinary items).

"Their logistics and aviation segment has been affected during MCO; however we are expecting a recovery in their logistics segment for 2HFY20 in light of better outlook for the automotive industry. Their aviation segment may still register losses in 2HFY20 as the industry remains challenged by Covid-19," Nazira said.

Recall that Pos Malaysia posted a 1QFY20 net loss of RM49.2 million, down by more than half from the RM141.3 million net loss of RM141.13 million achieved in the corresponding quarter last year. 1QFY20 was its seventh’ consecutive loss quarter — with its latest quarterly losses on the back of pre-tax losses posted in its core postal, logistics and aviation segments.

Pos Malaysia has seen its courier segment grow tremendously during the MCO.

Nazira said the company's international mail business has also recovered as the economy reopens.

"Management expects the trend to continue throughout 2HFY20 as consumers are adapting to the new normal," she said.

Nazira said HLIB upgraded Pos Malaysia shares to "buy" from "hold" with a higher target price of RM1.20 from 90 sen previously in anticipation of a recovery ahead.

Pos Malaysia announced on its website that its international mail and parcel services to selected countries have resumed following the recovery in flight and sea freight connectivity as well as the reopening of postal services in those countries.

"Please expect delays in delivery during this rather challenging period, as the extent of Covid-19 preventive measures vary country by country. Customers are advised to check with our counter staff on service availability prior to sending shipments to international destinations," Pos Malaysia said.

At Bursa Malaysia today, Pos Malaysia's share price closed up three sen or 3.23% at 96 sen at 5pm, valuing the company at some RM751.47 million.

The stock saw 4.84 million shares transacted.