POS Malaysia is expected to register 1Q20 and 2Q20 losses due to disruptions during the Movement Control Order (MCO).
In its trading notes, RHB Retail Research says this will consequently lead to a loss-making FY20F.
“However, ensuring acceleration in courier deliveries and usage of its digital services, spurred by the MCO is expected to lift the group’s longer-term prospects,” the research house said.
The bulk of operations affected include the over-the-counter postal and retail services, alongside flight restrictions impacting its aviation and international shipments as well as business closures for its end customers.
RHB says its foresees negative earnings surprise in 1Q20 due to revenue miss.
“We similarly expect 2Q20 results to be weak, owing to the extended MCO period until mid-May, albeit partially offset by a 30 to 40 percent fall in fuel prices,” it said.
Transportation costs constitute 25 percent of the postal service’s total cost base.
While Pos Malaysia is facing a downturn from the MCO, the partial lockdown has given rise to a surge in demand for Pos Laju deliveries, accompanies by a spike in usage of its Pos Online digital services.
The research house believes the acceleration in courier parcel volumes will persist beyond the MCO, supported by government initiatives to further promote e-commerce among SMEs and with a 6-month discount offer on small-sized parcel deliveries.
RHB Retail Research further projects POSM to record a FY20 loss of RM 63 million from a profit of RM47 million.
The research house further raises FY21F-22F earnings by 2 to 12 percent after factoring in higher expected courier volumes while partially offset by a quicker decline in mail volumers.
“Our DCF-derived TP is revised to MYR1.10 after rolling forward our valuation base to FY21F, which implies an undemanding 0.8x forward P/BV, -1SD to the 5-year historical mean of 1.4x”
