KUCHING: Banking on the decline in conventional mail segment, Pos Malaysia Bhd (Pos Malaysia) is branching out into other segments such as courier services and Ar Rahnu financing services as alternative revenue growth streams.
According to analyst Jerry Lee from RHB Research Institute Sdn Bhd (RHB Research) in a recent meet with the group, the conventional mail segment has been declining sharply in developed countries due to the increase in the usage of electronic mails which is ‘comparatively faster, cheaper and more eco-friendly.’
“As Malaysia continues on its path to become a developed country, such a trend is unavoidable. Pos Malaysia understands this, and has branched out,” Lee explained in his research note on the meeting.
“The group has unlocked one of its most valuable assets – its network – to advertisers, offering them direct mailing services to targeted audiences. Volume has been picking up and this has helped the company cushion the sharp decline in conventional mail.”
Apart from the strong demand from e-commerce, Lee added that Pos Malaysia had also seen robust growth for courier services.
“PosLaju has created new avenues to increase the sales volume of its prepaid service as well as expanding its reach via authorised agents. This business model was put into action last December and MPH Bookstore Sdn Bhd became the first of many appointed authorised agents,” he noted.
“We also learned that PosLaju intends to expand into the logistics segment and do not rule out an expansion into third party logistics (3PL) via the provision of warehousing services.”
Touching on the group’s venture into the Ar Rahnu’s alternative financing strategy, Lee noted that Pos Malaysia had set its focus on expanding Ar Rahnu services in the east coast of Peninsular Malaysia by targeting cottage industries and small entrepreneurs.
“We believe such a niche strategy could prove to be successful as Ar Rahnu provides an alternative to easy financing for small communities,” he added. “A vast network of post offices nationwide is a plus, providing easy access to customers. Further improvements to this service in ensuring the privacy of visitors could help win more clients.
“As Ar Rahnu is still a relatively new venture, we are not imputing any earnings contribution into our forecast. However, we do not discount the fact that it may become a significant growth driver for the company in the near future.”
Looking forward, Lee speculated that special dividends could be in the offing, stating that management did not commit to a special dividend but looked to maintain its generous dividend payout ratio of over 50 per cent.
“We had earlier highlighted that Pos Malaysia has RM70.8 million under Section 108 of the Income Tax Act 1967 that it can dish out as special dividends. Based on its current share base, this could translate to a dividend of 13.2 sen per share, or an additional yield of three per cent.
“Under Section 108, the company will need to use up the funds by December 31, 2013. Pos Malaysia is able to pay up to RM212.5 million from its retained earnings. Nevertheless, are subject to shareholders’ approval.”
As such, RHB Research remained positive on Pos Malaysia’s outlook and valued the company at 14.4 times the price earnings forecast for financial year 2014, which was at a 15 per cent discount to its regional peer, Singapore Post.