Pos Malaysia’s acquisition plan positive to growth — Analyst
by Venu Puthankattil, firstname.lastname@example.org. Posted on August 11, 2012, Saturday
KUCHING: Pos Malaysia Bhd’s (Pos Malaysia) current business strategy to acquire a courier company in the Middle East, as part of its five-year transformation plan, has been viewed positively moving forward.
At Pos Malaysia’s 20th annual general meeting recently, chief executive officer Datuk Khalid Abdol Rahman had said that the group aimed to conclude the ongoing talks by year-end.
OSK Research Sdn Bhd (OSK Research) analyst Mandy Teh stated yesterday that the research house had long hinted that there was high possibility of the postal group being involved in mergers and acquisitions (M&As) relating to the courier segment.
“We are positive on the group’s healthy market share growth, improvement in the provision of logistics services, robust parcel shipment nationwide, especially in the Klang Valley due to resilient domestic consumer spending, and the benefits from its route optimisation plan.”
The analyst added that as Pos Malaysia had the experience and the expertise in the domestic courier segment, she believed that it would likely venture into the region’s domestic courier segment rather than the international segment.
There were many courier companies operating in the Middle East including the international big boys, such as DHL, Fedex and UBS, as it was an emerging region with healthy gross domestic product (GDP) growth, she said.
“We expect increasing demand for the courier services in the region in view of resilient growth in its economic activities.
“The regions’ most popular courier company, Aramex, has been registering a compounded annual growth rate of five per cent in revenue since 2008 to 2011.
“Even during the 2008-2009 financial crisis, Aramex’s revenue was only slightly impacted, down by five per cent.
“In addition, the Middle East region has recently emerged as one of the fastest growing consumer markets,” she pointed out.
She believed the acquisition was not likely to cause the company’s capital expenditure (capex) to bloat, noting that the group had earlier guided for capex of RM100 million to RM150 million per annum for financial year 2013 (FY13).
“We believe the group has been careful in planning for capex in order to fulfill its commitment to pay good dividends at the minimum payout ratio of 35 per cent of profit after tax.
“Furthermore, considering its huge cash pile of RM544 million or net cash per share of RM1.01 as of March 31, 2012, we are positive on the group’s ability to pay the usual dividend even if it were to increase its capex to RM200 million per annum over the next five years.
The analyst was also positive on the group’s upcoming first quarter FY13 results, which were scheduled to be announced on August 14, which she expected to be in line with OSK Research’s forecast.
She remained positive on the group while maintaining the fair value for the stock at RM4.14 per share, based on a sum-of-parts valuation and 10 times FY12 price earnings ratio.