Pos Malaysia's 9MFY24 results disappointed on poor cost containment says Kenanga Investment Bank in the review of the group's earnings results released yesterday.

Despite broadly stable revenue for 9MFY24, core net loss expanded 62% YoY as the gradual improvement in postal and logistics segment from the trough was eclipsed by the high-cost operating environment while its aviation segment recovered strongly on booming air freight sector. The house had widen its FY24-25F net loss forecast by 13-81%, respectively and reduced its TP by 17% to RM0.25 (from RM0.30) and maintain the UNDERPERFORM call.

POS's 9MFY24 core net loss of RM124.1m came in wider than expected at 87% of full-year forecast. The key variance against forecast came from its inability to contain operating expenses. YoY, POS's 9MFY24 revenue fell marginally by 1% with decrease in demand for its postal service (-6%) and logistics services (-17%) offset by stronger showing from aviation (+28%).

Its postal sales continued to be affected by slowdown in online shopping and lower demand from major e-commerce players that were investing in in-house delivery capabilities (for instance, Shopee Express of Shopee). Moreover, its logistics sales were weighed down by unfavourable business environment. Meanwhile, its aviation sales continued to recover on the back of the
booming air freight sector coupled with the resumption of umrah charter flights (which also boosted in-flight catering services).

All in, its 9MFY24 core net loss expanded by 62%.

Kenanga forecasts net loss for FY24 and FY25 by 13% and 81%, respectively, from its inability to contain operating expenses
despite improving business environment in the 3Q (i.e. logistics segment incurred forex loss of RM10.4m in the 3Q). In terms of valuations the house reduced its TP by 17% to RM0.25 from RM0.30 based on unchanged discount rate equivalent to a WACC of 6.2% and a terminal growth rate of 0%.