HLIB Research cuts Pos Malaysia's earnings forecasts

PETALING JAYA: Pos Malaysia Bhd’s earnings forecasts have been slashed by up to 8%, due to larger than expected losses from its postal services business segment.
Hong Leong Investment Bank (HLIB) Research cut Pos Malaysia’s earnings forecasts for the financial years ending 2017, 2018 and 2019 (FY17/18/19) by 5%, 8% and 5% respectively, to account for the weaker postal services revenue and profitability, following its six-month net profit that came below expectations.
“Reported Q2FY03/17 core net profit of RM5.7 million and 6MFY03/17 at RM34.7 million, accounting for 38.4% of HLIB expectation for FY16 and 38.8% of consensus,” it analyst Lim Sin Kiat said in a report last Friday.
Lim said the group continued to be affected by the weakness in convention mail volume, while international transshipments business is relatively seasonal and opportune with low margins.
However, he said the courier segment continues to grow as courier services demand is expected to improve in the coming years due to e-commerce boom.
The group’s cumulative core profit after tax and minority interests in the first half rose 14.7%, was mainly underpinned by stronger courier volume growth due to higher e-commerce transactions year-on-year.
HLIB Research downgraded Pos Malaysia to “sell” from “buy” recommendation, with a lower target price of RM3.36, from RM3.87 previously, post earnings cut based on unchanged 20 times FY18 price-earnings ratio.