Analysts positive on Pos Malaysia’s divestment of WCA
KUCHING: Pos Malaysia Bhd’s ( Pos Malaysia) proposed divestment of its wholly-owned World Cargo Airline Sdn Bhd (WCA) to Asia Cargo Network Sdn Bhd (ACN) has been viewed positively by analysts as the divestment is expected to lessen the group’s losses.
In an announcement on Bursa Malaysia, Pos Malaysia, via wholly-owned Pos Aviation Sdn Bhd (Pos Aviation) has proposed to partially divest wholly-owned WCA to ACN. Essentially the deal entails WCA issuing shares representing 51 per cent stake of the total enlarged shares in WCA for a cash consideration of RM40 million.
The proceeds will be utilised by WCA to mainly settle WCA’s intercompany debts owed to Pos Aviation Group and Pos Malaysia totalling RM37.8 million.
“We view this latest corporate development positively since this non-core divestment will yield a RM63 million disposal gain and losses at the group level is expected to be lessened since WCA’s the first nine months of the financial year 2019 (9MFY19) net loss is approximately RM32 million,” the research team at Kenanga Investment Bank Bhd (Kenanga Research) remarked in a report.
“Since WCA is a non-core business to Pos Malaysia, this will allow WCA to be managed more effectively with improved reliability and service performance by ACN which is experienced in the aviation industry,” it explained.
It noted that WCA provides services primarily for Pos Malaysia for the movement of postal and courier products to Sabah and Sarawak. The proposed transaction is expected to be completed within four months from signing of the share subscription agreement.
For the nine-month financial year ending December 2019,
WCA’s audited revenue was approximately RM83 million while loss after taxation was approximately RM32 million. Its audited net liabilities as at December 31, 2019 was RM66.4 million.
Meanwhile, given Pos Malaysia’s inability to close down post offices, coupled with its unionised workforce and losses in its postal services segment, Kenanga Research believed that losses are only expected to continue moving forward.
“The courier business will continue to operate in a competitive environment pressured by price and cost challenges. The group is continuing with its efforts to manage cost whilst increasing operating efficiency,” it said.
As such, Kenanga Research retained its ‘ market perform’ rating on the stock.
We view this latest corporate development positively since this non-core divestment will yield a RM63 million disposal gain and losses at the group level is expected to be lessened since WCA’s the first nine months of the financial year 2019 net loss is approximately RM32 million. Kenanga Research