OSK reiterate BUY call on POS with TP of RM4.12

DRB announced that it has succeeded in its bid for Khazanah’s 32.21% stake in Pos Malaysia for RM622.8m, or RM3.60 per share. The acquisition price reflects a RM17.3m that is refundable if POSM cannot secure Government consent for commercial use of land leased to it by 31 Dec 2011. We see DRB, which owns a 70% of Bank Muamalat, as a good fit for POSM as the former could leverage on the latter’s postal network to enhance both their operations and growth as a more complete network that offer financial services. Although we see the offer price as unattractive and not reflective of the value of POSM’s related land, it still adequately reflects POSM’s postal business at 14.5x FY11 PER. Given that we see DRB aiming to redevelop POSM’s land, we maintain our SOP derived FV of RM4.12, which includes the value of the 5 land plots directly owned by POSM. While the share price may suffer some selling pressure in the short term, we maintain our BUY call on potential longer term upside arising from DRB unlocking the land value.