Thursday, February 5, 2015

Singapore Post

Singapore Post: 3QFY15 net profit rose 7.3% to $42.2m, while revenue grew 7.6% to $239.6m as improved contributions from ecommerce and logistics businesses offset the decline in mail revenue.

Mail revenue fell 2.3% to $130.1m, from decreases in both domestic and international mail, while Retail and ecommerce revenue inched 1.3% as ecommerce growth offset decline in traditional retail and agency services.

The bright spot was the logistics segment, where revenue grew 20.7% on improved contributions by subsidiaries across the value chain, e.g. Quantium Solutions (logistics), Famous Holdings (freight forwarding), General Storage (self-storage). The consolidation of The Store House also fed to top line.

Total expenses grew 8%, largely from the consolidation of new subsidiaries and transformation costs.

While Sing Post’s transformation momentum appears on track, we do stress that significant results will come only a few years down the line, as proper infrastructure needs to put in place to support a platform that can handle large volumes.

For 9MFY15, Sing Post spent $115.1m on acquisitions. Recent ones include CouriersPlease (Dec ’14, Aussie small parcel delivery business), Famous Pacific Shipping NZ (Jan ’15, NZ freight forwarder).
Aside, its new mail sorting machine is operational and will improve capacity by 17% and mechanization rate to 95%

Sing Post had also appointed consultants to redevelop the retail mall at Singapore Post Centre.
As at Dec, Sing Post has net cash of nearly $300m (net-cash/equity of 28.7%) with only $14.1m short term borrowings due. As such, expansion momentum should largely be sustained. Interim DPS of 1.25¢ unchanged.

Sing Post is currently trading at 29.3x annualized 9MFY15 P/E, and yielding of 2.5%.

Latest broker ratings:
UBS maintains Neutral with TP of $2.20
UOB KayHian maintains Hold to TP increased to $2.21 from $2.02
OCBC maintains Buy with TP increased to $2.19 from $2.17
CIMB maintains Hold with TP increased to $2.08 from $1.96

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