KUALA LUMPUR: Research firms were disappointed with Pos Malaysia Bhd’s performance for the financial year 2023 (FY23), and have raised their forecast net loss for the company to account for the deterioration of its postal business.
Kenanga Research has increased its forecast net loss on Pos Malaysia for FY23 and FY24 by 33 per cent and 24 per cent, respectively.
In its research note, it said despite the recovery in its logistics and aviation service, Pos Malaysia’s (1Q) FY23 results were disappointing.
Kenanga said it had reduced its discounted cash flow (DCF)-derived target price (TP) for Pos Malaysia by nine per cent to 42 sen from 46 sen previously, based on a discount rate equivalent to a weighted average cost of capital (WACC) of 6.5 per cent and a terminal growth rate of zero per cent.
“We are cautious about Pos Malaysia due to its struggling conventional mail business which is trying to stay relevant in the digital age.
“We doubt that we have seen the bottom of its declining courier volume as it has to face competition from new players such as J&T Express and Ninja Van that undercut aggressively on rates to grow their market shares,” it said.
As such, the research house has maintained its ‘underperform’ call for the company’s shares, noting that Pos Malaysia’s cost-cutting measures also could not counter further deterioration in its postal segment.
Meanwhile, Hong Leong Investment Bank (HLIB) in its research note also raised its FY23 and FY24 net loss forecast for Pos Malaysia to -RM88.3 million and -RM33.3 million, respectively, from -RM77.1million and RM10 million previously, to reflect the higher operating costs.
“Nevertheless, we expect a turnaround in FY25 to RM9 million. Post-earnings revision, our TP is lowered to 46 sen from 56 sen previously.
“We downgrade our rating to ‘sell’ from ‘hold’ previously as we remain wary over Pos Malaysia’s challenging operating environment,” said HLIB.
As for the company’s outlook, HLIB said that regulators are likely to impose a floor pricing for courier services to support the survival of local players and prevent industry players from undercutting each other.
However, it noted that there is no clarity as to what the base price may be at this point.
“If the base price is set below Pos Malaysia’s current rates, we think it is unlikely that the company will experience significant recovery in parcel volumes as price-sensitive e-commerce players are expected to continue favouring service providers with the most competitive rates,” said HLIB.
At 11.03, Pos Malaysia’s shares were up by half-a-sen to 54 sen with 212,800 shares changing hands. – BERNAMA
