HLIB Research said last-mile delivery players like Pos Malaysia have a challenging future
PETALING JAYA: Pos Malaysia Bhd
’s operating environment is expected to remain challenging as it continues to be impacted by falling contribution from its postal segment and higher financing costs.
Hong Leong Bank Investment (HLIB) Research said Pos Malaysia registered a larger core net loss of RM30.4mil in the second quarter of 2023 (2Q23) from a core net loss of RM27.9mil in 1Q23.
The results were below both the research house’s and consensus estimates of core net loss of RM88.3mil and RM80.1mil, respectively, mostly due to higher-than-expected tax expense.
“Overall revenue on a quarter-on-quarter basis contracted by 3.5%, as contribution from most of its key operating segments eased (postal: down by 3.8%, logistics: down by 10.7%, others: down by 3.5%), with the exception of its aviation segment (up by 6.9%).
“The improvement across its aviation segment was due to higher in-flight catering and ground handling services, on the back of sustained demand for air travel.
“In tandem with the weaker top line, core net loss also widened to RM30.4mil,” HLIB Research said in a report yesterday.
Falling contribution from Pos Malaysia’s postal segment, due to a decline in overall parcel volume from its contract customers and stronger competition among last-mile delivery players, led to a 10.1% drop year-on-year in the group’s revenue.
“This was partially offset by improvements in its aviation (up by 13.7%) and others (up by 26.7%) segments, which was supported by increased air travel demand and improved performance from Ar-Rahnu.
“Given the weaker turnover, coupled with higher finance costs, Pos Malaysia’s performance slipped into the red, reporting core net loss of RM30.4mil,” HLIB Research said.
For the first half of 2023 (1H23), Pos Malaysia suffered a core net loss of RM58.3mil compared with a core net loss of RM29.9mil in 1H22. Year-to-date the group’s revenue declined by 5.4%.
HLIB Research said last-mile delivery players like Pos Malaysia have a challenging future as the group continues to grapple with “masking” practices and the rising trend of major eCommerce players making the transition towards in-house delivery.
“In our view, it is essential for the government to intervene with appropriate policies and measures to establish a fairer environment.
“Although the Communications and Digital Minister has initiated discussions with last-mile delivery providers to gain a deeper understanding of the circumstances, we believe that formulating the necessary policies might be a time-consuming process,” the research house said.
Citing “reallocation of internal resources” and a lack of visible near-term catalysts for Pos Malaysia, HLIB Research said it is ceasing coverage on the company.
“Our previous ‘sell’ recommendation and target price of RM0.46 should no longer be used as a reference. going forward,” it said.
