POS Malaysia - 2Q13 results above expectations

Period    2Q13/6M13

Actual vs. Expectations    The 6M13 results came above our expectations but in line with consensus. The 6M13 core net profit of RM67m made up 48% of the consensus’s earnings but 65% of our FY13 full year estimate. The courier and logistic division was the main driver for the better than expected earnings. 

Dividends   A 8 sen interim dividend has been declared (less 25% tax) 

Key Results Highlights   For the YTD, the 6M13 core net profit was up by 29% (YoY) to RM67m on the back of a 6% increase in revenue. This was mainly due to higher revenue contribution from its courier and logistic division (+15%) coupled with the operating margin improvement from 16% to 23%. The higher revenue was attributable to an increase in the online transaction business.   

 QoQ, the 2Q13 core net profit of RM30m was down by 13% due to the higher operating expenses incurred for the retail business and the depleting revenue contribution from the mail business (-5%).

 YoY, the core net profit increased by 12% due to the higher operating margin recorded for the courier and logistic business from 12% to 23%. Nonetheless, this was moderated by the RM11m operating loss from the retail segment due to high staff and depreciation costs together with lower other segment contributions i.e. from digital certificates and the printing and insertion business.        

      

Outlook   Management is banking on the higher and profitable courier and logistic segment via leveraging on Pos Laju widespread centres in Malaysia.    

Change to Forecasts  We have revised our FY3-14E higher by 14% and 5% respectively as we factored in higher contribution from the courier business as well as the enhancement in the operating margin due to a higher transaction volume.  

Rating  Maintain OUTPERFORM

 We are maintaining our OUTPERFORM rating due to the attractive upside (+31%) and decent dividend yield of 3.7% of the stock. 

Valuation    We have revised our TP higher to RM3.90 from RM3.70 previously (based on DCF) following our forecast revisions. 

Risks   (1) Delays in the execution of its business transformation plan and (2) a sharp increase in the jet fuel price.  

Source: Kenanga