A memorandum of understanding (MoU) has been signed between China and Malaysia’s national postal companies.

Pos Malaysia Bhd in a recent announcement to Bursa Malaysia said its MoU with China Post, which would be effective for two years, involved a feasibility study for collaboration in five areas – express mail service, bulkmail/parcels and small packets, development of cross-border e-commerce, funds remittance services, and regional integrated logistics network.

The deal was welcomed by a stock analyst with Kenanga Research.

He believes the real task ahead for Pos Malaysia remains in its ability to reduce operating costs and expand its retail businesses.

“There is still a lot of room for the company to improve its costs and operational efficiency,” he said, adding that the proposed mail and parcel-processing hub, which is expected to be operational by next year, is one of the avenues to do just that.

The automated mail-processing centre could help reduce manpower, which currently accounts for about 65% of the company’s total operating costs.

Previously, Pos Malaysia chairman Tan Sri Aseh Che Mat announced that the company was in talks with the Information, Communications and Culture Ministry for a possible postal tariff hike, so that the company could use the excess funds to improve its service quality and revenue.

It was a reasonable request considering the fact that the last time the postal tariff was reviewed was 17 years ago.

The analyst says that even a slight increase in postal tariff could contribute significantly to Pos Malaysia’s revenue.

Pos Malaysia’s conventional mail volume for FY08 totalled 1.271bn and contributed RM566m in terms of revenue to the company. This made conventional mail services the biggest contributor to the company’s revenue, which stood at RM921.7m for the year in review.

The quarter ended 31 March saw Pos Malaysia making a net profit of RM22.8m on revenue of RM230.9m.

This represented a decline of 41.3% and 5.5% respectively from the same period a year ago.

On the bright side, however, the company remains debt-free and is currently in a net cash position of 35 sen per share.

Pos Malaysia has a dividend policy payout ratio of 35%. For the past two financial years, the company had been paying more than 50% of its net profit as dividend to its shareholders.

The foreign brokerage analyst says the postal business by and large is still a relatively lucrative and recession-proof business.

He says the demand for mail services is expected to remain strong at least for the next few years despite the upsurge in electronic mail usage.

As for Pos Malaysia’s business in the provision of courier services, the analyst says the company has to worry about competition in the local market.

He says the national postal company has to focus on improving the efficiency and reliability of its courier services to compete with other players who are more established in the segment.

In the last financial year, Pos Malaysia reported a growth of 17.5% year-on-year in terms of volume handled for courier services. The analyst attributes that strong growth to a low-base effect.

On the other hand, Pos Malaysia’s move to expand into basic financial services to complement its postal services will bode well for the company’s future bottom line, as the venture could provide the company an avenue to earn lucrative commissions.

Pos Malaysia’s management had earlier confirmed it was negotiating with several local banks for potential tie-ups, which could be finalised by year-end.

Source: The Star

Tags: Asia, China Post, Mail Services, Malaysia, Malaysia Post, Networks, Pos Malaysia, Retail Networks