KUALA LUMPUR (Nov 17): While Pos Malaysia Bhd's share price has plunged almost 40% from the peak of RM1.20 in late December last year, some analysts do not think the postal group is a good bargain unless it fixes its operations.

Pos Malaysia’s share price fell to an intraday low of 73 sen on Wednesday’s morning trade, declining as much as five sen or 6.41% after the postal service company reported worsened results for the third quarter ended Sept 30, 2021 (3QFY21). It later closed at 74 sen, still down 4.5 sen or 5.73%, with some 2.68 million shares traded. At 74 sen, the group was valued at RM575.59 million. Year to date, the counter has fallen about 39%.

According to Bloomberg, Pos Malaysia has two "neutral" calls, two "hold" calls, and one "market perform" rating. There is no ‘buy’ recommendation on the stock.

It saw some two million shares transacted, lower than its 200-day average volume of 2.16 million.

According to Bloomberg, Pos Malaysia has two "neutral" calls, two "hold" calls, and one "market perform" rating.

The group’s 3QFY21 net profit widened to RM43.9 million from RM7.43 million a year earlier amid lower revenue and higher finance costs. Its quarterly revenue also fell 13.93% to RM536.26 million from RM623.03 million previously.

For the nine months ended Sept 30, 2021, its cumulative net loss grew 180.9% to RM212.52 million from RM75.67 million on the impairment of property, plant and equipment during the period, while revenue fell 6.7% to RM1.67 billion from RM1.79 billion.

However, all is not lost for Pos Malaysia despite facing operational headwinds moving forward if the national courier gets its parcel delivery segment strategy right.

In a note on Wednesday (Nov 17), AmInvestment Bank Research has maintained its "hold" rating for the stock, but with a lower fair value (FV) of 76 sen as the research house projects a wider net loss for the group’s financial year ending Dec 31, 2021 (FY21).

“We tweak our FV down slightly to RM0.76 (from RM0.78 previously) for Pos Malaysia, based on a P/B of 0.60x, at a premium to its historical P/B of 0.45x to factor in the bright spot in the high-growth parcel delivery segment. Our FV is adjusted for a 3% discount to reflect our two-star ESG [environmental, social, and governance] rating for the company,” said the research house.

Based on AmInvestment’s projection, Pos Malaysia will record a wider net loss of RM197.9 million in FY21 (from RM164.9 million it projected previously).

The research house also tweaked its FY22 earnings forecasts slightly to RM89.2 million loss (versus RM88.8 million loss) and a smaller profit of RM2.7 million in FY23 (versus RM3.6 million profit), to reflect a slower recovery of Pos Malaysia’s businesses from the Covid-19 impact due to the prolonged lockdown.

“We are cautious of the significant drop in parcel volume handled by Pos Malaysia. The company’s operation is still being affected by the resurgence in Covid-19 infections locally.

“Nonetheless, we believe all is not lost for Pos Malaysia if it is able to get its act together given the bright outlook for the parcel delivery segment (of which Pos Malaysia is one of the top three players in Malaysia) underpinned by: the structural and irreversible change in consumer preference towards online shopping, and the freeze on new courier licences in Malaysia from Sept 2020 to Sept 2022 to ensure rational competition in the segment,” it added.

Hong Leong Investment Bank (HLIB) Research, meanwhile, said the group’s operating environment continues to be challenging, hampered by the fast-shrinking snail mail volume as well as the fierce competition in the last-mile delivery industry.

Nonetheless, HLIB has maintained its "hold" call with an unchanged target price (TP) of 76 sen, based on P/B multiple of 0.65 times on FY21 book value per share (BVPS) of RM1.18.

Kenanga Research, which has kept its "market perform" rating on the stock, added: “Pos Malaysia’s inability to close down post offices, coupled with its unionised workforce could well mean profitability at its postal services segment is capped. The courier business is expected to improve on e-commerce demand but will continue to operate in a competitive environment pressured by price and cost challenges.”

Kenanga also did not make any changes on its TP but noted that the saving grace is a 5% dividend yield. The TP is kept at 72 sen based on 10 times FY22 earnings per share.