Re­search house up­grades Pos Malaysia to ‘buy’

The Sun (Malaysia) - - SUNBIZ -

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.

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