Research house upgrades Pos Malaysia to ‘buy’
PETALING JAYA: Hong Leong Investment Bank (HLIB) Research has upgraded Pos Malaysia Bhd to a “buy” call with a higher target price of RM3.87 from RM3.40 previously, based on potential synergies from its recent acquisitions.
HLIB Research made upward adjustments to its forecasts on Pos Malaysia’s core earnings for FY18 and FY19 by 17% and 19% respectively, factoring in the full year contribution from KL Airport Services Sdn Bhd (KLAS) and Konsortium Logistik Bhd (KLB).
“The KLAS deal announced earlier by the group is at its final stages of completion. Pos Malaysia has just commenced discussion with KLAS management team on its future business directions. KLAS businesses will soon be rebranded to represent Pos Malaysia’s identity,” it said in its report yesterday, following an analyst briefing with the group.
The group is still contemplating its capacity expansion options, which include capacity expansion for KLAS at Kuala Lumpur International Airport, totally rebuilding the old low cost carrier terminal or to use Pos Malaysia’s own space beside LCCT.
“Total expected capex for the expansion is circa RM60 million to RM70 million which could be easily funded from the group’s cash pile,” said HLIB Research.
Meanwhile, the firm said in contrast to KLAS, surplus capacity is still present in KLB and the Pos Malaysia management is looking at several ways to reduce costs (through higher warehouse ownership which is cheaper).
The business case for the KLB acquisition is its business-to-business logistics function, which complements its current business-to-consumer focused last mile services.
“Integration of both courier and KLB would possibly expand its e-commerce business further given the widening of scope of their service offering to the online market places,” it said.
Commenting on talks that the tariff hike for mail business is being considered by the authorities, HLIB Research said that documents have been submitted and the company is currently awaiting authorities’ approval.
“That aside, the group is also reviewing its courier business rates as they are currently below market average. Both would have direct positive impact on the group’s earnings once it comes into fruition. We have not imputed any of these until further confirmation,” it said.
It also highlighted the group’s improved business offerings since Datuk Mohd Shukrie took the helm as CEO.
“Service variety has been widened with Prepaid Dropbox and Ezibox being added to their outlets. The group plans to add 50 units of Ezibox in multiple locations to upgrade service level. Other service enhancements that were recently added include Drive-thru Pos outlets and mobile app for tracking to improve user experience,” it added.