Malaysia's 200-year old snail mail operator taps Alibaba giant for growth

An employee arranges mail in a sorting area at the Pos Malaysia Bhd Dayabumi Complex post office in Kuala Lumpur on Sept 27, 2016.
An employee arranges mail in a sorting area at the Pos Malaysia Bhd Dayabumi Complex post office in Kuala Lumpur on Sept 27, 2016. PHOTO: BLOOMBERG

KUALA LUMPUR (BLOOMBERG) - Malaysia's biggest postal company is seeking a more direct role in providing logistics services to Chinese e-commerce giant Alibaba Group Holding, tapping a boom in online retailing.

Pos Malaysia Bhd. plans talks with Alibaba this month on bypassing the middlemen when shipping goods sold on its platforms, Mohd Shukrie Mohd Salleh, its chief executive officer, said. Surging parcel deliveries for online shopping drove a 40 per cent jump in profit in the fiscal first quarter and full-year earnings will be higher than a year earlier, he said.

"My focus is still e-commerce, and it is driving the logistics business. When e-commerce is booming, somebody needs to deliver these items," Mohd Shukrie, 42, said in an interview on Sept. 27. "Marketplace owners wants to deal with logistic players directly. I'm going to China to meet up with Alibaba and other market players" in October, he said.

Postal companies in Asia are remodeling themselves by expanding overseas to meet rising demand spurred by a global retail e-commerce market valued at about US$1.2 trillion by the Universal Postal Union. Pos Malaysia, which started work in the early 1800s delivering mail by bicycle, is the top performer this year among 14 global courier stocks with a market value of at least US$500 million (S$686.8 million), recording a total return of 49 per cent, beating United Parcel Service and FedEx.

Pos Malaysia stock has soared 85 per cent from a February low as record earnings from its courier business and a potential increase in tariffs for the first time in six years buoyed the shares. The government is examining its proposal for higher postal rates, said Mohd Shukrie. The company is valued at 25 times its 12-month projected earnings, versus 18 for UPS, the world's most valuable courier company.

Alibaba said its delivery affiliate Cainiao Smart Logistics Network "works collaboratively with logistics participants to enhance customer experience and operation efficiency. "It is natural we talk to industry participants," it said in an e-mailed statement in response to queries by Bloomberg News.

While Pos Malaysia handles parcel deliveries for Alibaba through freight forwarders, or so-called consolidators such as Japan's Sankyu, the Kuala Lumpur-based company wants to deal directly with these marketplace owners, said Mohd Shukrie.

"The future is about cutting the middleman, and the existence of consolidators will be under threat," he said. "Right now, we deal more with consolidators for parcels from China to the world, but understandably marketplace owners want to deal with logistic players directly."