KUALA LUMPUR: Pos Malaysia Bhd will likely register first quarter losses on disruptions during the Movement Control Order (MCO), consequently leading to a loss-making full year, said RHB Research.
The firm, however, expects ensuing acceleration in courier deliveries and usage of its digital services (spurred by the MCO) to lift Pos Malaysia's longer-term prospects.
"We also expect second quarter (Q2) 2020 results to be weak, owing to the extended MCO period until mid-May, albeit partially offset by a 30 to 40 per cent fall in fuel prices," RHB Research said, adding that transportation costs constituted 25 per cent of the group's total cost base.
Pos Malaysia's financial years 2021 and 2022 earnings growth have been forecast at 2.0 per cent-12 per cent.
This is after RHB Research factors in higher expected courier volumes while partially offset by a quicker decline in mail volumes due to the underlying shift in industry trends.
"A return to profitability in FY21 is premised on revenue rebounds and margins improvement," it said.
RHB Research said the margins for its courier segment were unlikely to excite over the near term due to the pricing discounts.
The firm, however, is positive on Pos Malaysia's longer-term prospects due to a potential boost in e-commerce transactions.
"Given its extensive network coverage and sorting capacity, we believe the group is also well positioned to capture greater market share. This is amid a blanket increase in parcel volumes nationwide," it said.
The firm maintained a "buy" call on Pos Malaysia with a higher target price of RM1.10.
"Downside risks to our call include a rise in mail volume declines, stiffening courier pricing competition, and higher-than-expected operating costs," RHB Research said.