PETALING JAYA: Postal services provider Pos Malaysia Bhd’s share price fell to an 11-month low, sliding 57 sen or 11.42% to close at RM4.42 after earnings for the third quarter ended Dec 31, 2017 released on Monday came in below expectations.
The share-price drop saw RM446.18mil erased from its market capitalisation, making the counter the second worst performer on the local bourse.
A total of 8.5 million shares were traded.
Despite the weaker-than-expected third quarter financial performance, analysts maintained their positive calls on the stock, with RHB Research pointing out that the market would look to cues from Pos’ new group chief executive officer Al-Ishal Ishak on the company’s business direction for its courier segment at a briefing with analysts.
The research house said Al-Ishal may reveal the pricing strategy, competition and cost management strategy for the courier segment, where margins declined 5.3 percentage points.
“We believe an aggressive pricing strategy and competition in the courier segment had resulted in weaker-than-expected revenue growth and margins,” it said, adding that earnings also missed because of higher operating expenditure, finance and depreciation charges.
RHB Research, which has maintained a “buy” call on the stock, has a discounted cash flow target price of RM6.30 pending the briefing. The company remained in net cash position although total debt has increased 82% to RM437mil.
It said that based on a sensitivity analysis, every one percentage point decline in courier revenue will have a 2.8 percentage point impact to net profit forecasts.
Meanwhile, Kenanga Research has cut the earnings estimate for the financial year ending March 31, 2018 (FY18) to FY19 by 30% to 21% to account for the lower courier segment margins. “Moving forward, we expect courier segment to continue as the group’s main growth driver, riding on the expanding e-commerce, although margin pressures from increased competition looms,” it said.
The research house has maintained a “market perform” call on the stock with a lower target price of RM5 from RM5.10.
Kenanga Research said the company’s earnings outlook “is heavily reliant on the growth of its courier segment” which in turn would benefit from the growth of the e-commerce industry but noted that increasing competition could be a challenge.
Other risks included slower-than-expected growth in courier volumes, wider-than-expected losses from its postal services, and weaker-than-expected logistics and aviation segment earnings.