A few years back, courier business especially last-mile delivery was identified as a sunrise business with explosive growth potential due to e-commerce boom.
Now, we realize that the competition in courier business is ferocious and bloody, and its earning growth potential seems to be not that attractive anymore.
Like many other investors, I did consider to invest in courier stocks before.
GDex is perhaps the best listed courier company but its PE ratio was, and is still extremely high.
POS is the largest courier company in the country but it has a sunset mail business which will drag down its courier profit.
Nationwide looks hopeless and I have nothing much to say about it.
CJ Century was my only hope as it just started its courier service business in early 2018. However, after 3 years it's still suffering in loss and seems difficult to turnaround anytime soon.
POS is not the type of company I like, as it "feels" complicated and government-linked, similar to MAS which was almost bankrupt and delisted few years ago.
POS recent financial results are not good. It has registered losses for 8 consecutive quarters.
POS lost RM165.8mil in FY2019 (from Apr18 to Mac19). It changed its financial year end in 2019 to Dec19 and from Apr19 to Dec19, its loss widened to RM215.6mil in just 3 quarters.
In the first 6 months of FY2020 from Jan20 to Jun20, it still registered loss of RM68.2mil.
One word to describe it: BAD. It looks on track to another loss-making year.
Nevertheless, there is one thing that is very interesting in its latest FY20Q2 quarterly report. The first sentence in its "Future Prospect" reads: POS Malaysia recorded its first monthly Profit After Tax in June 2020, since January 2019.
It's not EBIDTA or PBT, it's PAT!
June is the last month of its Q2. If the momentum continues, then July, August & September which means Q3 must be profitable? Or is it just a "one month show" in June?
After further research, it looks like a turnaround is not baseless.
First, we need to know why POS is making huge losses since the last 8 quarters.
Prior to year 2020, POS has 6 reported business segments:
- Postal (mail)
- Aviation (cargo & ground handling etc)
- Logistic (total logistic service & warehousing)
- Others (printing & insertion, digital cert & Ar Rahnu)
- Postal (mail) segment is the main reason for overall poor financial performance with huge losses which widened every single year from RM148.5mil in FY17 to RM201.9mil in FY20, while its revenue dropped every year as expected.
- Revenue in courier segment increased every year as expected, but its operating profit dropped every year alarmingly from RM181mil in FY17 to just RM14.7mil in FY20.
- Revenue and profit from International segment were also in a downtrend which turned into loss in FY19 & FY20.
- Aviation was a new segment in FY18 and contributed consistent operating profit to the group.
- Logistic segment contributed significantly to its revenue but its profit could be ignored.
- Though under "others" segment with lowest revenue, it contributed rather significant and consistent profit to the group.
- The revenue from traditional mail will continue to decline year after year
- One-off impairment especially from its Logistics and Aviation segment like the past 2 years
- Competitive environment in its courier segment might reduce its profit margin further
- Continuous dumping of shares by KWSP & KWAP