Pos Malaysia Bhd
(April 19, RM2.95)
Maintain buy at RM3.05 with fair value at RM3.80: We are maintaining our buy call on Pos Malaysia with an unchanged fair value of RM3.80 per share, based on 20% discount to our discounted cash flow (DCF) estimates (weighted average cost of capital of 9.5% and terminal price-to-earnings of 14 times).
However, we have lowered our FY10F earnings per share (EPS) estimates by 20%. With the salary review from a tariff hike being a one-off, our FY11F-FY12F has increased 2%-10%. On net basis, our valuation remains intact.
As for Pos' expected salary adjustment, we had projected a +10% yearly increment for the next three years; while Pos has officially declared an immediate 11%-20% increase once new tariff rates come into effect from July 2010. The review will not be pro-rated.
The two-prong first-stage strategy of Khazanah's divestment plan includes: (i) the stamp tariff review; and (ii) the usage of government-owned land currently allocated only for postal infrastructure.
After detailed analysis of Pos' properties, we found that it holds three under-utilised pieces of land, worth an estimated RM250 million (46 sen per share). The land with the most significant development potential is a tract next to KL Sentral which currently is a PosLaju centre and warehouse for vehicles. We value this 2.7-acre (1.09ha) land at RM1,800/sq ft, which is 39 sen per share or 13% of its current price.
A more concrete sale in the immediate term would be Pos' current 2.2-acre mail processing centre (MPC) in Bukit Raja. The property is expected to be vacant once the national MPC in Shah Alam opens in 4Q10.
The stock represents an opportunity for a 6% yield (a conservative 40% payout) and an implied 25% return, on top of a special dividend potential arising from its land sale, with re-rating catalysts from the government's deregulation. - AmResearch, April 19
This article appeared in The Edge Financial Daily, April 16, 2010.
(April 19, RM2.95)
Maintain buy at RM3.05 with fair value at RM3.80: We are maintaining our buy call on Pos Malaysia with an unchanged fair value of RM3.80 per share, based on 20% discount to our discounted cash flow (DCF) estimates (weighted average cost of capital of 9.5% and terminal price-to-earnings of 14 times).
However, we have lowered our FY10F earnings per share (EPS) estimates by 20%. With the salary review from a tariff hike being a one-off, our FY11F-FY12F has increased 2%-10%. On net basis, our valuation remains intact.
As for Pos' expected salary adjustment, we had projected a +10% yearly increment for the next three years; while Pos has officially declared an immediate 11%-20% increase once new tariff rates come into effect from July 2010. The review will not be pro-rated.
The two-prong first-stage strategy of Khazanah's divestment plan includes: (i) the stamp tariff review; and (ii) the usage of government-owned land currently allocated only for postal infrastructure.
After detailed analysis of Pos' properties, we found that it holds three under-utilised pieces of land, worth an estimated RM250 million (46 sen per share). The land with the most significant development potential is a tract next to KL Sentral which currently is a PosLaju centre and warehouse for vehicles. We value this 2.7-acre (1.09ha) land at RM1,800/sq ft, which is 39 sen per share or 13% of its current price.
A more concrete sale in the immediate term would be Pos' current 2.2-acre mail processing centre (MPC) in Bukit Raja. The property is expected to be vacant once the national MPC in Shah Alam opens in 4Q10.
The stock represents an opportunity for a 6% yield (a conservative 40% payout) and an implied 25% return, on top of a special dividend potential arising from its land sale, with re-rating catalysts from the government's deregulation. - AmResearch, April 19
This article appeared in The Edge Financial Daily, April 16, 2010.
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