Kenanga cuts Pos M'sia target price to RM1.30 after weak FY19 results

KUALA LUMPUR: Kenanga research said Pos Malaysia Bhd's FY19 core net loss of RM126.1mil came in below its and consensus estimates due to a weaker-than-expected performance in the postal services segment.

"FY19 profit before tax plunged from RM117.3m to a loss before taxation of RM158.4m due to widening losses from mail segment and impairment charges of RM39.6m from the loss of goodwill in Pos Logistics," it said in a note.

Year-on-year, the core net loss of RM126.1mil excluding RM39.6mil goodwill impairments compared to a net profit of RM93.3mil due to losses in the mail segment as a result of double-digit contraction in mail volume and bill payments. 

Kenanga now forecasts a loss of RM15mil for FY20 following the weak results after accounting for higher losses in its postal services.

"We believe POS is suffering from an environment of elevated opex at this current juncture. Intensifying competition coupled with continued expansion efforts have led to stagnating margins, thus causing profit deterioration despite volume and revenue growth.

"Meanwhile, given POS’ inability to close down post offices, coupled with its unionised workforce and losses in its postal services segment, losses are only expected to continue widening moving forward," it said.

The research house reiterated its underperform recommendation on the stock and lowered its target price to RM1.30 from RM1.50 previously.