POS: Bottom-line plunged (UPDATED)

Results Update

For QE31/3/2015, POS's net profit dropped by 57% q-o-q or 62% y-o-y to RM20 million while revenue was mixed- up 10% q-o-q but down 7% y-o-y _ at RM396 million.

Profit dropped due to lower volume of international business mail & registered mail; increased operating expenses in the courier segment despite higher sales volume; increased losses in the retail segment due to lower bill payment & financial services; and losses of RM0.4 million (compared to profit of RM6.6 million) in the Other segment (which covers sales of digital certificates, printing and insertion business and rental income).


Table: POS's last 8 quarterly results


Chart 1: POS's last 35 quarterly results

Valuation

POS (closed at RM4.94 on May 22, 2015) is now trading at PE of 21 times (based on last 4 quarters' EPS of 23.7 sen). With earnings growth receding into distance memory, this PE multiple is not justifiable. This may explain the steady selling by Aberdeen Asset Management & Mitsubishi UFJ Financial Group. However, this selling was absorbed by buying by EPF & KWAP. For Changes in Substantial Shareholders, go here.

Technical Outlook

For the medium-term, POS is likely to trade sideways between RM4.50 & RM5.50. A break below RM4.50 could see the stock testing its long-term uptrend line at RM4.00. That's good entry level to this stock as its management team works overtime to reverse its recent profit downturn.


Chart 2: POS's monthly chart as at May 22, 2015 (Source: ShareInvestor.com)

Conclusion

Based on poorer financial performance & unattractive valuation, I would rate POS a SELL INTO STRENGTH.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, POS.