Pos Malaysia plans for e-commerce future with Tigers Global tie-up

Shukrie: ‘At the global level, traditional mail will continue to experience structural decline going forward. This is due to the growing adoption of alternative digital communications platforms such as electronic mail, mobile communications and digital messaging, among others.’

JUST a few days ago, Malaysia’s postal company Pos Malaysia Bhd inked an agreement with Tigers Global Logistics Sdn Bhd (TGL) that would see more cross-border e-commerce activities with TGL’s end-to-end commerce fulfilment solutions.

Some see this as another move for Pos Malaysia to be an e-fulfilment logistics provider, as it rides on the fast-growing e-commerce services sector, which presents an enormous opportunity for global logistics players.

Under the deal, TGL will manage Pos Malaysia’s e-commerce fulfilment operations (e-fulfilment) out of Pos Malaysia’s cargo centre at Kuala Lumpur International Airport, using TGL’s smarthub technology and warehouse management system.

The deal also comes after Chinese retail giant Alibaba announced potential plans to expand its logistics influence and presence in South-East Asia by becoming the launch partner for Malaysia’s new Digital Free Tade Zone (DFTZ).

While Pos Malaysia group chief executive officer Datuk Mohd Shukrie Mohd Salleh has made it clear the group doesn’t intend to do away with its conventional mail business, he says the e-commerce theme is the way forward for it to grow in the longer term.

“At the global level, traditional mail will continue to experience structural decline going forward.

“This is due to the growing adoption of alternative digital communications platforms such as electronic mail, mobile communications and digital messaging, among others.

“That said, Pos Malaysia aims to remain relevant to our vision of ‘Connecting Malaysia and Beyond – for Today and Tommorrow’,” Mohd Shukrie tells StarBizWeek.

The collaboration with TGL, according to Mohd Shukrie, has been on mutually agreed commercial terms that are renewable.

Pos Malaysia’s business approach with TGL is flexible, “but we are in for the long haul,” Mohd Shukrie says.

TGL is a logistics provider specialising in freight forwarding and customs brokerage. It has been operating in Malaysia for last three years via Pos Malaysia’s warehouse at KL International Airport (KLIA).

TGL’s parent company is Tigers Ltd, a company based in Hong Kong, with 70 offices in 11 countries globally.

Tigers is currently supported by two investors, Jumbo Glory Ltd and GeoPost. GeoPost is a wholly-owned unit of France’s La Poste Group, a postal service company in France generating total revenue and profits of about 23 billion euros and 675 million euros in financial year 2015, according to an analyst.

With that, TGL has expanded its network and has been leveraging on GeoPost’s network of parcel distribution globally.

“Therefore, the tie-up with TGL will provide more synergistic opportunities for both parties.

“It is also timely just as the Government launched the DFTZ about two weeks ago and Pos Malaysia sealing its position as the local partner in developing the e-Fulfillment hub of DFTZ,” says the 44-year-old vibrant chartered accountant.

Mohd Shukrie shares that Pos Malaysia’s five-year transformation plan, SCORE 2.0 that was launched last year was premised on e-commerce being the key growth driver for the business.

“Currently, about 43% of our revenue is derived from e-commerce activities, but we see this growing larger moving forward,” he says, adding that e-commerce is now a new business segment for Pos Malaysia.

According to Pos Malaysia’s 2016 annual report, its mail division contributed 53% to the group’s financial year 2016 (FY16), followed by courier 32%, retail 12% and other business about 3%.

The group posted net profit of RM63mil on revenue of RM1.7bil in FY16 compared to FY15’s net profit of RM127mil and revenue of RM1.5bil.

Its earnings before interest, taxes, depreciation and amortisation (ebitda) margin shrank from RM252.5mil in FY15 to RM181.4mil.

Pos Malaysia attributed the lower net profit to higher transportation costs associated with the group’s transhipment business and higher staff costs.

Staff costs went up higher on increase in wages following its collective agreement wage adjustment in January 2015.

In an effort to deal with margin compression, Pos Malaysia embarked on the five-year transformation programme to improve its existing postal and courier operations, as well as further expand its e-commerce offerings to clients.

Meanwhile, on DFTZ, Mohd Shukrie says Pos Malaysia aims to be the premier e-commerce logistics and fulfilment services provider for e-commerce players located in DFTZ.

“We are still waiting for further details for this,” he notes.

DFTZ’s physical and virtual zones implementation will be done in phases, with the first e-fulfilment hub centred at KLIA Aeropolis - a development centred on air cargo and logistics, aerospace and aviation.

The e-fulfilment hub is said to operate from Pos Malaysia’s International Hub at KLIA.

While Mohd Shukrie had mentioned during the tie-up that the group expects RM30mil and RM100mil in topline contributions from e-fulfilment in FY18 and FY19, some analysts think that the RM100mil addition to revenue could be too aggressive unless Pos Malaysia achieves a sizeable base of clients under the e-fulfilment service.

There are barely enough details at this juncture, but analysts reckon that earnings contribution from the tie-up with TGL could be meagre in the near term. However, prospects look bright over the mid to longer term on Asean’s rising e-commerce retail penetration.On its acquisition of integrated logistics player KL Airport Services Sdn Bhd (KLAS) last year (now known as Pos Logistics), Mohd Shukrie says it expects the company to perform well in FY18.

“Pos Logistics secured a US$200mil contract from Tenaga Nasional Bhd’s (TNB) unit TNB Fuels Sdn Bhd to transport coal from South Africa, Indonesia and Australia to TNB’s coal-fired power plants.

“Going forward, Pos Logistics’ assets will play a larger role in Pos Malaysia’s push into e-commerce logistics and fulfilment services,” he explains.

Pos Malaysia’s could face weakness in the traditional mail volume and low margin transhipment business, but what is obvious now is it is creating products and services that would lift the segment. The group’s acquisition of KLAS, Konsortium Logistics and Pos Air Cargo Express (Pos Ace) last year for about RM800mil is an indication that Pos Malaysia is expanding into the logistics and e-commerce business.

Pos Ace leases two aircraft and is contracted by Pos Malaysia to deliver mail items daily to Sabah and Sarawak.

While the revenue contribution from this is not substantial, Mohd Shukrie says the group is now able to offer first mile capabilities for regional e-commerce players.

Pos Malaysia shares closed up one sen or 0.2% at RM4.97 yesterday, arriving at a market capitalisation of RM3.9bil.

Business , Pos Malaysia Bhd


Across The Star Online