RHB Investment: Pos Malaysia to return to profitability near term after rate hike

KUALA LUMPUR, Jan 29 — Pos Malaysia Bhd is expected to post a turnaround and return to profitability in the near term after announcing the hike of its postage rates, RHB Investment Bank said.

The postal group in an announcement yesterday stated the revision would affect commercial customers with stamp rates for commercial mail more than double to RM1.30 (from RM0.60) while rates for personal and non-commercial mail users remain unchanged at RM0.60.

The new rates will be effective February 1.

“Following the rate revisions, we expect Pos Malaysia to return to profitability in the financial year 2021 forecast (FY21F), boosted by a turnaround in earnings for its postal services and international businesses, which registered segmental losses of RM115.7 million and RM16 million in the first-half financial year 2020 respectively,” the investment bank said in a note.

It believed the impact on mail volume decline would not overshoot relative to current trends, given the relatively minimal cost base for commercial customers.

RHB Investment also foresees a prospect of Pos Malaysia resuming its payout dividends starting from financial FY21F onwards (FY19:4 sen).

The bank has upgraded Pos Malaysia to “buy” from “neutral” with a target price of RM1.70 from RM1.40.

Meanwhile, AmInvestment Bank upgraded the counter to “hold” from “sell” with a fair value of RM1.34 from RM1.27.

“We now project Pos Malaysia to register a smaller net loss of RM9.6 million in FY20F and a net profit of RM9.8 million in FY21F versus net losses of RM69.1 million and RM45.5 million previously, following an earnings boost from the latest development.

“Nevertheless, we believe the earnings boost from the higher postages will be partially eroded by:  the hastened digitalisation of physical mail, resulting in accelerated mail volume contraction, more aggressive opex to improve the quality of postal service,” it added.

At 12.08pm, shares of Pos Malaysia increased six sen to RM1.50 with 10.33 million shares transacted. — Bernama

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