Pos by OSK

Pos Malaysia (POSM)’s 5QFY11, revenue and core earnings of RM1.48bn and
RM149m were largely within our projections, representing 96-97% of our FY11
forecasts covering 15 months. Note that the group changed its FY year-end from
Dec to Mar to be in line with that of its major shareholder, DRB-HICOM. Still, we
are surprised that the company did not declare any dividend for now. We believe
this may be because the group needs capex to refurbish all its postal outlets and
invest in IT systems. We are maintaining our BUY call and earnings forecast for
now, pending the unveiling of synergies with DRB-HICOM under the
Transformation Master Plan 2 (TMP 2) in next 2 to 3 weeks. Maintain BUY, with a
FV of RM4.14 (previously RM4.12), based on SOP valuation.
In line. During POSM’s FY11 covering 15 months, the group’s revenue and core earnings
were largely in line with our projections. The group saw healthy 6% and 10% revenue and
core earnings growth on a quarterly basis. However, y-o-y revenue was flat at 1% growth,
while core earnings dropped 42% owing to higher depreciation charges in respect of its
National Mail Processing Centre in Shah Alam, which commenced operation July 2011
and tax charges this time around.
Delivering healthy profits. Save for its core mail business which deliver weaker
performance this quarter with revenue declined by 3% owing to the organic decline in mail
volume handled, POSM’s courier and other business which includes the sales of digital
certifications, printing and assertion business improve by 61% and 53%in operating
profits. There were increase in on demand customers and contract customers as well as
higher volume of parcel handled from its PosLaju services. The group also managed to
turnaround its retail segment which showed lower operating losses due to higher
commissions earned from agencies such as JPJ, and the insurance companies.
No dividends for now, but there is still hope. We were taken by surprise that the
company did not declare a dividend as management had hinted of such a possibility
earlier. As such, we think that it is still possible that POSM may announce a final dividend
for FY11 at a later date, after it finalises the amount of capex that it may require to
refurbish its postal outlets nationwide and investment in a new  IT system. We are
maintaining our dividend projections for now, with a net dividend per share (NDPS) of 11.5
sen, based on a conservative 40% payout ratio. This translates in a healthy dividend yield
of 6%.