Strong opportunities but opex threat for Pos, says HwangDBS

Strong opportunities but opex threat for Pos, says HwangDBS
Business & Markets 2013
Written by Jeffrey Tan of theedgemalaysia.com
Friday, 06 September 2013 11:36

KUALA LUMPUR (Sept 6): HwangDBS Vickers Research has maintained its ‘buy’ call with sum of parts based target price of RM5.60 on Pos Malaysia Bhd, as it sees strong opportunities for the firm in spite of operational expenditure (opex) threats.

In a note today, the research house said it continued to like the stock for its solid growth opportunities, strong balance sheet and favourable return on equities.

HwangDBS analysts Kevin Wong and Chong Tjen San said they believed there are strong opportunities from synergies with the DRB-Hicom group of companies to increase revenue for the mail and courier company.

“This includes new logistic services, property development and integration of more products and services into Pos’ outlets,” said the pair.

“Also, Poslaju’s courier rates are still among the lowest in Malaysia,” they added.

Nevertheless, the analysts highlighted near and medium term cost pressures from higher fuel and staff, representing 13% and 61% of opex respectively.

Petrol prices increased 10.5% this week while the Communications and Multimedia Minister is calling for another revision of wages of postal workers.

In addition, the research house foresees a possible special payout given its net cash of RM1.23 per share as at end-June 2013.