PETALING JAYA: Pos Malaysia Bhd’s proposed disposal of a 49% stake in Pos Aviation Engineering Services to SIA Engineering Co Ltd (SIAEC) for RM10.1 million will only generate a marginal gain for Pos Malaysia.
In a note, HLIB Research said that while it is neutral on the news, it did think the disposal was a good move as Pos Aviation will be able to gain more clients and potentially see a turnaround after registering a loss of RM1.7 million for FY19.
“The proposed divestment will facilitate the entry of SIAEC as Pos Aviation’s strategic partner and allow the latter to expand its customer base, enhancing its technical expertise, expanding its product offerings and diversifying into new lines of MRO, and tapping into new markets and distribution networks,” it said.
Upon completion of divestment, Pos Malaysia and SIAEC will hold 51% and 49% equity interest in Pos Aviation respectively and it will become a jointly-controlled entity of Pos Malaysia.
SIAEC is a major provider of aircraft maintenance, repair and overhaul services in Asia-Pacific. It has a client base of more than 80 international carriers and aerospace equipment manufacturers, providing line maintenance services at 36 airports in eight countries, as well as airframe and component services on some of the most advanced and widely used commercial aircraft in the world.
HLIB Research said it is maintaining its “hold” call on Pos Malaysia with an unchanged target price of RM1.55, below the valuation of its peer’s (Singapore Post) three-year average valuation of 1.9 times its book value per share.
“The discount is fair in view of its high fixed cost structure and margin compression in their courier segment due to increase in players in the market; however, this should be balanced by upside of positive sentiment from the impact of a tariff increase.
“Nonetheless, we reckon that this tariff hike will only be an ephemeral victory at best while the structural issues of declining mail volume will persist,” it said.