Pos Malaysia's rate hikes may hurt postal volume

KUALA LUMPUR: Pos Malaysia Bhd's hikes in international postage rates will hasten the digitalisation of physical mail and hurt postal volume, says AmInvestment Bank research.

However, it added that the hikes are expected to allow Pos to pass on the higher cost to the consumers, resulting in neutral impact to its earnings.

The research house maintained its overall assumptions that the overall postal traffic will decline 15%, 10% and 5% in FY19-21F, which is 12% lower than in FY18.

It kept its sell recommendation on the counter with a fair value of RM1.33 as its postal segment continues to suffer from cost inefficiency. It also reiterated its view that any potential postal tariff hike will be only a temporary relief to the segment.

"Meanwhile, the courier segment continues to face price and cost pressures which are eating into its margins," it said.

To recap, Pos said it would revise its international postage rates in tandem with the increase by the Universal Postal Union starting January 2020 to align its operation cost.

The company guided for postage rates for delivery to increase by 30% to 210% starting next year, and may further increase by up to another 50% in 2021.

This is due to the US increasing its terminal dues rates, as well as other countries reaching an agreement to increase their own postal rates.

International mails/parcels make up about 5% of total postal traffic of Pos.
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