SingPost

SingPost: Spending $182m to develop a fully integrated regional eCommerce Logistics Hub in Tampines LogisPark. The advanced warehousing facility and adjacent office building will be built on a 3.25ha plot of land leased from JTC for 30 years, and have a built-up area of 0.55m sqft. This is the first of its kind in SE Asia, and the hub will house a fully-automated parcel sorting facility on the ground floor, and with two modern warehousing floors above. Meanwhile, the adjacent building will house SingPost’s local and regional logistics operations, i.e. Quantium Solutions, Singapore Parcel and Lock+Store. Management is expecting to reap efficiency gains, among others by housing the ecommerce logistics hub close to each other. We reiterate that a successful JV with Alibaba is contingent on how robust SingPost builds its ecommerce logistics network. Construction is expected to be completed by end Jan ’16, and operations to commence in 2H16. The development will be funded by the group’s internal cash resources. PhilipCapital thinks that SingPost would have no problem funding the investment with net cash of $210m (ex $350m perps). The house forecasts FY15e CFO to be over $200m, comfortably paying dividend and distribution to shareholders and perps holders alike. Nevertheless, the house thinks valuations are a tad rich currently, given the hub would only be ready two years out. The house downgrades to Accumulate from Buy with TP of $2.07