KUALA LUMPUR, Feb 5 — HwangDBS Vickers Research has downgraded Pos Malaysia Bhd to “hold”, with a lower target price (TP) of RM5.54 from RM5.60 due to limited upside.
It said Pos Malaysia had gained 124 per cent in 18 months as the market priced in the Group’s robust earnings outlook and business synergies with DRB-Hicom Bhd.
“This has reduced the upside to our sum-of-parts based target price, which leads to the downgrade,” it said in a research note today.
It said going forward there could be pressure on the company’s earnings due to staff and transportation costs, estimated at 61 per cent and 12 per cent respectively, of total operating expenses.
“Based on our sensitivity analysis, a five per cent hike in staff costs would reduce earnings before interest and tax (EBIT) by seven per cent, and a five per cent hike in transportation costs would reduce EBIT by three per cent,” said HwangDBS Vickers.
To offset the cost pressure, it said the group needed to see a larger pick-up in courier and non-postal revenues.
Courier earnings expanded at a compound annual growth rate of 56 per cent over the last three years and although non-postal operations like Ar-Rahnu and shared banking services contributed only 21 per cent of revenue currently, HwangDBS expected a stronger growth ahead. — Bernama
