SingPost: CLSA downgrades to Underperform from Outperform with $1.10 target price, citing company expanding into more low-profitability businesses, so remain unconvinced about the recent run-up in share price. Highlights company's plans to venture into overseas markets, non-mail businesses could actually hurt profitability as it will be challenging incumbents in areas that inherently generate lower returns than what it currently enjoys.
Expects ROE, down since FY06, to continue declining as company has not been able to generate sufficient growth & foresees this trend to perpetuate due to lack of income growth drivers & marked increase in costs. Despite low returns, stock still offers dividend yield of ~5%.
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