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Pos Malaysia valuations seen to be using forward of fundamentals

Pos Malaysia Bhd
(May 24, RM5.18)
Maintain underperform with a aloft aim cost (TP) of RM4:
Pos Malaysia Bhd’s net distinction for a financial year finished Mar 31, 2017 (FY17) came in next a expectations though in line with accord during 99% of full-year forecasts. The disastrous flaw from a outcome is due to higher-than-expected handling expenses. Despite a slight gain downgrade, we lift a TP to RM4 (previously RM3.70). Our gratefulness is formed on 26 times FY18 gain per share (+0.5 customary flaw above five-year brazen chronological meant compared with 23 times price-earnings ratio previously).

Quarter-on-quarter, Pos Malaysia’s turnover for a fourth entertain finished Mar 31, 2017 (4QFY17) came in prosaic mostly due to aloft grant from a mail business (+12%) though equivalent by reduce bearer (-8%) and general (-12%) segments. However, due to aloft cost incurred, pre-tax distinction fell 53%. This brings 4QFY17 distinction after taxation and minority interests to RM10.6 million, exacerbated by a aloft effective taxation rate of 58% compared with 34% in 3QFY17. The house of directors will cruise multiplication remuneration when a full-year comment is adopted in Jun 2017.

Year-on-year, Pos Malaysia’s FY17 income rose 21% due especially to a inclusion of KL Airport Services Sdn Bhd (KLAS), that was acquired in Sep 2016 and improved opening from bearer (+23%) and others (digital certificates, copy and insertion) (+24%), that some-more than equivalent a reduce mail business (-5%) and trans-shipment (-26%). FY17 net distinction rose 33% due to stronger opening from a bearer multiplication with stronger gain before seductiveness and taxation (+100%) and improved margins purebred in bearer and others.

We trust Pos Malaysia’s share cost has already factored in a new news upsurge of a Digital Free Trade Zone and a valuations are using forward of fundamentals. Looking ahead, we design Pos Malaysia to continue to be influenced by debility in required mail volume and a low-margin trans-shipment business. Courier use direct is approaching to urge and overcome a disappearing mail shred over a longer tenure due to a e-commerce boom. The synergy from KLAS is usually approaching to bear fruits over a longer run as collateral output and enlargement costs could be a drag on earnings. In an bid to raise patron experience, Pos Malaysia will deliver some-more 24/7 e-commerce available hold points by introducing Pos Laju EziBox (parcel locker service) and Pos Laju EasyDrop (drop-off facility) as good as encouragement of comforts during all Pos Laju Centres and post offices nationwide. — Kenanga Research, May 24

Article source: http://www.theedgemarkets.com/article/pos-malaysia-valuations-seen-be-running-ahead-fundamentals