Pos Malaysia Berhad

If the Annual General Meeting on 3^rd April 2007 passes all the resolutions brought before it, Pos Malaysia & Services Holdings Berhad (PSH) will be restructured and a new creature will take over its listing status. The new entity will be known as Pos Malaysia Berhad (PMB). The circular to shareholders indicated that the restructuring is aimed at providing direct exposure of shareholders to PMB, the main operating vehicle; apart from achieving greater operational efficiency.

Through this corporate exercise, shareholders will receive a capital repayment of RM1.50 per share and be offered a lot of PMB shares. So is this a good deal?

PSH has been giving out quite a fair bit of dividend since 2003. In 2003, it declared a dividend of 4% less 28% tax for year ending December 2002. In 2003, it gave out a dividend of 5% less 28% tax for year ending December 2003. PSH became generous and declared a dividend of 7.5% less 28% tax for year ending December 2004. For year ending December 2005, PSH declared a final dividend of 10% and a special dividend of 5%. No dividends have been declared for year ending December 2006.

The trading profile for PSH for the year 2006 and 2007 is normal. The highest price it attained was in November 2006 when it touched RM5.60 and the lowest was in May when it sunk to RM4.06. In 2007, the highest price was RM5.05 while the lowest was RM4.20. It is not a punter’s stock. Today (29 March 2007), it is trading at RM4.74.

At this price, with the capital return of RM1.50, the adjusted price will then be RM3.24 – fairly priced to attract investors to this counter especially those funds intending to procure GLC interests in Malaysia. PMB should be able to maintain its dividend payout.

Is PMB worth holding on to after the restructuring?

If you put RM3, 240 into a fixed deposit, it should bring you an interest income of RM 119.88 per annum. Let us assume PMB pays out a yearly dividend of 7.5% minus 27% tax. That will mean the dividend income accruing to you will come to RM 54.75 net tax. This is a loss of RM65.13.

Assuming there is a capital gain of about 10%, then we can factor in RM324 and add the potential dividend of RM54.75 bringing in a return of RM 378.00. If this is the scenario, then it may be worthwhile to hold on to the stock. Otherwise sell it on strength and wait for a good opportunity to buy into better dividend paying stocks.

Quote of the Day:

“Patience with others is Love, Patience with self is Hope, Patience with God is Faith.”
Adel Bestavros

Heartsong