Pos Malaysia profits below estimate
Pos Malaysia gathered a core net profit or RM20.1m for the first quarter of the financial year 2010, which was lower than estimates but would gain from the upcoming tariff hike in the second half of the financial year 2010, reports Borneo Post. The article continues:
According to a research report by OSK Research, core net profits were 7% below its estimates and 30% lower than consensus estimates for the period.
Similarly, the group’s annualised revenue for Q1 missed the research house’s estimates by 6% although OSK Research considered this to be in line once the new tariff kicked in.
The company’s top-line grew 3% quarter-on-quarter (q-o-q), highlighted the research report, with the decline from its mailing segment lifted by higher contributions from its courier and retail business as volume grew.
Against the same quarter in 2009 when revenue only grew 0.07%, all segments only fared slightly better.
Earnings before interest, tax, depreciation and amortisation (EBITDA) margin was showing an improvement q-o-q with Q1 standing at 16.8% compared with 16.2% in the previous quarter, added the research house.
This, it noted, was attributable to better efficiency due to higher volume but was lower by one percentage point against Q1 on higher maintenance and supplies among other expenses.
The research report predicted a better second half for the group, driven by the impending postal tariff hike from 1 July as the quantum of increase would more than offset the staff salary hike.
Judging from the recent retracement in its share price, the research house believed investors were waiting to see how the higher tariff would be reflected in Pos Malaysia’s earnings come during the second half on the financial year, given the divergence in brokers’ earnings estimates.
OSK Research mentioned that the stock was further dragged by the sell down of the Employees Provident Fund’s (EPF) stake in Pos Malaysia from 11.5% in April to a current 5.76%.
Re-rating catalysts were the emergence of a potential strategic partner to take up Khazanah Nasional Bhd’s stake and the potential revision of the Postal Land Act, which would unlock its land bank value.
The research house opined that the current share price level grossly undervalued Pos Malaysia’s earnings momentum come 2011 when the full-year effect of the tariff hike would kick in.
With the results being in line, OSK Research maintained its target price for Pos Malaysia at RM3.50 per share.
1 UK pound = 4.8 RM (xe.com, June 2010)
