Industry consolidation for logistics players seen in longer term period

KUALA LUMPUR: Industry consolidation for logistics players has been projected by analysts in the longer-term, as a result of intensifying competition.

“In the near to medium term, we believe that the crowded parcel delivery space is likely to remain saturated until intensifying competition eventually squeezes out the smaller players, leading to an industry consolidation in the longer-term,” the research arm of Kenanga Investment Bank Bhd (Kenanga Research) said in a sector update.

Kenanga Research recapped that for the third quarter of current year 2019 (3QCY19), Pos Malaysia Bhd (Pos Malaysia) reported yet another quarter of losses of RM29 million, weighed down by persistent double-digit contraction in mail volumes.

“Pos Malaysia continued to remain in the red.

“Pos Malaysia missed expectations again as losses widened due to the drag from its postal service.”

While the group continues to hope for a tariff hike, the research arm believed that losses are likely to balloon moving forward,

This was premised on the group’s inability to close down post offices, unionised workforce and underperforming segments.

“Moving forward, their courier business is expected to continue to dampen earnings; until an eventual breakeven can be expected, likely in financial year 2021 (FY21).”

All-in, Kenanga Research opted to stay sidelined from this sub-sector as the research arm awaited meaningful earnings recovery, most likely from companies maturing out of their expansion gestation phases and an eventual consolidation of the industry.