Pos Malaysia Bhd's first-half fiscal year 2024 (1HFY24) results have fallen short of expectations due to poor cost containment. Analysts have reiterated an UNDERPERFORM call on the stock, with the target price reduced by 10% to RM0.30. The company's 1HFY24 core net loss expanded by 61% year-on-year (YoY), driven by challenges in its postal and logistics segments, which offset recovery in its aviation services.

For 1HFY24, Pos Malaysia reported a core net loss of RM76.7 million, which accounted for 85% of the full-year forecast. The disappointing performance was largely attributed to the company's inability to manage operating expenses effectively.

Revenue for 1HFY24 saw a slight decline of 1% YoY. The postal segment experienced a 3% drop in sales, while logistics services took a more significant hit with a 22% decrease. These declines were somewhat balanced by a 27% increase in revenue from the aviation segment, buoyed by the resurgent air freight sector and the resumption of umrah charter flights, which also boosted in-flight catering services.

The postal segment continued to struggle due to the ongoing slowdown in online shopping and reduced demand from major e-commerce players like Shopee, which have been investing in in-house delivery capabilities, such as Shopee Express. The logistics segment was similarly affected by a challenging business environment, further exacerbating the company's financial woes.

Quarter-on-quarter (QoQ), Pos Malaysia's revenue for the second quarter of FY24 (2QFY24) fell by 10%, primarily due to the absence of a one-time boost from a government contract for its postal services, which saw a 17% drop in sales. The aviation segment also reported a 4% decline in revenue, although this was partially offset by a 4% improvement in logistics services. Overall, the company's core net loss more than doubled QoQ.

Looking forward, analysts have widened the net loss forecasts for FY24 and FY25 by 59% and 34%, respectively, to account for higher operating costs. The revised target price of RM0.30 is derived from a discounted cash flow (DCF) model, maintaining a discount rate equivalent to a weighted average cost of capital (WACC) of 6.2% and a terminal growth rate of 0%.

Source: Kenanga
Title: Further into Losses