SingPost: SingPost has entered into a conditional JV agreement with Alibaba, using Quantium Solutions (QS) as the vehicle for the JV. At S$91.7m, Alibaba will pay 28x P/E for the 34% stake in QS. This is positive as it establishes a floor for SingPost’s valuation. However, losing a 34% stake in its e-commerce logistics engine (QS) will likely lead to mild earnings dilution in the near term.
That said, earnings shortfall can be mitigated with M&As using the S$229m proceeds (net of working capital). Within ASEAN, Indonesia is likely to be the key growth market, but infrastructure issues are likely to plague e-commerce growth in the near term. More positive on the medium-term impact when SingPost capitalizes on Alibaba’s volumes as they expand across Asia Pacific, which will lower the cost per parcel in a winner-takes-all-market.
CIMB upgrades its rating from ADD to UPGRADE with TP: $2.07. Though earnings growth may only accelerate in the medium term, investors are paid to wait with a 3.7% yield.
UOB Kay Hian maintains its BUY rating with TP: $2.19.
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