RHB Research maintains ‘buy’ with Pos Malaysia at RM 1.10 TP, 16 percent upside. Pos Malaysia reported a markedly narrower 1Q20 core net loss of RM 27 million within the research house’s expectations.
“The improved results came on lower operating expenses, partly offset by a 6% YoY revenue drop due to the pandemic and MCO,” said RHB Research.
However, the MCO’s subsequent earnings drag should be softened by a courier volumes surge in 2Q20 and gradual re-opening of the economy, while the group is projected to return to black in 2H20.
1Q20’s core net loss narrowed considerably to MYR27m (4QCY19: -MYR54m), which we deem to have met our full-year estimate of RM 63 million loss but missed consensus estimates of RM 13 million profit.
“We attribute the improved results to management’s better cost controls alongside the postal tariff hike in February, albeit dampened by the Movement Control Order (MCO) which affected its postal, aviation and logistics businesses, as reflected by the lower topline,” the research house said in its trading notes today.
RHB Research further believes the losses could widen in 2Q20 due to further revenue shortfall during the extended MCO period.
However, this is expected to be mitigated by a surge in courier volumes, with 590,000 daily parcels recorded in April. This will also be supported by 60 percent and 176 percent increase in users and shipments through its SendParcel online platform.
The Group has also seen a strong recovery in transhipment volumes following the resumption of business in China.
“We expect POSM’s losses to reverse in 2H20 upon the normalisation of business activities in addition to its courier segment’s strong momentum – although we believe its aviation segment will remain under pressure for the year due to reduced air traffic.”