Wednesday, December 1

Pos Malaysia’s main challenge is cost inefficiency

0

Pos Malaysia will continue to contain the group’s costs by rationalising its post office network via potential relocation, right-sizing or closure, or transform into e-commerce fulfilment centre. — Bernama photo

KUCHING: Pos Malaysia Bhd’s (Pos Malaysia) main challenge is its cost inefficiency, AmInvestment Bank Bhd’s research team (AmInvestment Bank) opines.

Following a briefing with the group, the research firm came away feeling cautious on Pos Malaysia.

According to AmInvestment Bank, Pos Malaysia will continue to contain the group’s costs by rationalising its post office network (potential relocation, right-sizing or closure, or transform into e-commerce fulfillment centre).

“We believe the main challenge for the company is its cost inefficiency as a result of a unionised workforce and its inability to significantly rationalise its extensive network of post offices,” the research firm said.

“Despite the costs containment measures implemented in financial year 2019 (FY19), the operating costs still remain high.

“This was due to higher costs incurred at the beginning
stage of the transformation plans, and some of the initiatives are still at an early stage which have yet to be able to show the full impact.”

On another note, AmInvestment Bank highlighted that the courier segment continues to face intense competition, resulting in margin squeeze.

“However, at the current share price and valuations, we believe the market has priced in the bad news.”

All in, the research firm maintained its ‘hold’ call.