Stock Name: POS
Company Name: POS MALAYSIA BHD
Research House: KENANGA
Pos Malaysia Bhd
(March 31, RM2.24)
Maintain buy at RM2.25 with target price of RM2.86: The prime minister announced that Khazanah Nasional Bhd would divest its controlling stake (32%) in Pos Malaysia Bhd as part of the government-linked company's transformation plan and strive for higher income.
The divestment plan will be in two stages - addressing various aspects of its business environment including its regulatory structure, usage of government controlled land and welfare of its employees; and a bidding and evaluation process to select a new and entrepreneurial shareholder .
We are positive on this news as it will address the long outstanding issue of a postal tariff hike.
We expect Pos' business will remain regulated with certain revisions to be made in Malaysia Communication and Multimedia Commissions provisions. In our opinion there are two main areas in the first stage of Khazanah divestment plan, which could be implemented immediately - the revision of postal tariff to compensate the employee benefits and the development of government-owned land under Pos management such as the general post office at Dayabumi, and other mail processing centres.
The management highlighted that there are no immediate plans to sell its own assets like those in Brickfields and Klang with the land value of over RM200 million. The management also indicated that they would spend about RM170 million in 2010 for capital expenditure using internally generated fund.
The objective of raising the tariff is to bring postmen's salary to the level of other civil services. The postmen and auxiliary policemen wages represent 63% of its total staff cost. If Pos secures a 100% increase in postal tariff and raise the staff salary by 20% to be inline with the civil service salary package, Pos will incur an increase of RM68 million in staff costs.
After taking into account the increased salary cost, the 100% tariff increase would add RM12 million to the bottom line or 1.3% of our FY10 revenue estimates. We maintain a buy with a target price of RM2.86. Our target price is based on discounted cash flow-derived valuation with 9.3% weighted average cost of capital. - Kenanga Research, March 31
This article appeared in The Edge Financial Daily, April 1, 2010.
Company Name: POS MALAYSIA BHD
Research House: KENANGA
Pos Malaysia Bhd
(March 31, RM2.24)
Maintain buy at RM2.25 with target price of RM2.86: The prime minister announced that Khazanah Nasional Bhd would divest its controlling stake (32%) in Pos Malaysia Bhd as part of the government-linked company's transformation plan and strive for higher income.
The divestment plan will be in two stages - addressing various aspects of its business environment including its regulatory structure, usage of government controlled land and welfare of its employees; and a bidding and evaluation process to select a new and entrepreneurial shareholder .
We are positive on this news as it will address the long outstanding issue of a postal tariff hike.
We expect Pos' business will remain regulated with certain revisions to be made in Malaysia Communication and Multimedia Commissions provisions. In our opinion there are two main areas in the first stage of Khazanah divestment plan, which could be implemented immediately - the revision of postal tariff to compensate the employee benefits and the development of government-owned land under Pos management such as the general post office at Dayabumi, and other mail processing centres.
The management highlighted that there are no immediate plans to sell its own assets like those in Brickfields and Klang with the land value of over RM200 million. The management also indicated that they would spend about RM170 million in 2010 for capital expenditure using internally generated fund.
The objective of raising the tariff is to bring postmen's salary to the level of other civil services. The postmen and auxiliary policemen wages represent 63% of its total staff cost. If Pos secures a 100% increase in postal tariff and raise the staff salary by 20% to be inline with the civil service salary package, Pos will incur an increase of RM68 million in staff costs.
After taking into account the increased salary cost, the 100% tariff increase would add RM12 million to the bottom line or 1.3% of our FY10 revenue estimates. We maintain a buy with a target price of RM2.86. Our target price is based on discounted cash flow-derived valuation with 9.3% weighted average cost of capital. - Kenanga Research, March 31
This article appeared in The Edge Financial Daily, April 1, 2010.
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