Sing Post

Sing Post's 3QFY16 results were broadly in line with expectations. Headline net profit crept up 0.6% y/y to $43.5m, with underlying earnings not far off at $43.9m (+0.7%). This brought 9M16 core earnings to $121.8m (+1.2%), making up 72% of street's full year estimate.

For the quarter, revenue jumped 32% to $316.2m, driven by e-commerce related activities and consolidation of TradeGlobal acquisition. E-commerce growth is gaining much momentum and now accounts for 33.4% of its 9M16 revenue, up from 27.1% previously.

Key segmental performance:
Mail - Revenue: $130.6m (+0.4%), operating profit: $38.9m (+2.5%)
Despite the absence of contribution from service providers Novation Solutions and DataPost, which were divested in 1QFY16 and 2QFY16, international mail volumes benefitted from increased e-commerce deliveries, offsetting the decline in traditional mail. Excluding the impact of the divestments, revenue would have grown 8.8% and operating profit by 7.2%.

Logistics - Revenue: $162.2m (+33%), operating profit: $12.1m (+74.7%)
This segment was largely buoyed by rising contributions from e-commerce logistics activities as well as integration of new subsidiaries.

Retail & E-Commerce - Revenue: $54.5m (+138%), operating profit: $4.2m (+138.9%)
This was mainly boosted by inclusion of newly acquired US subsidiary, TradeGlobal from Nov '15.

However, operating margin narrowed to 17.3% (-4ppt) due to losses from lower retail rentals as a result of the redevelopment of Singapore Post Centre retail mall.

To further enhance its end-to-end e-commerce solutions business, the group has recently launched its global omni-channel commerce and fulfilment platform, SP Commerce, which will integrate TradeGlobal and Jagged Peak operations.

SingPost expects capex to remain high till FY17 from the ongoing construction of the E-commerce Logistics Hub (est. completion: mid-2016) and redevelopment of Singapore Post Centre mall (est. completion: mid-2017).

Balance sheet remains healthy with a low net gearing of 11.8% as at Dec '15, supported by positive operating cash flow of $50m in the quarter.

Management is still working to issue an additional 5% of new shares to Alibaba, but would need to extend the long-stop date. Meantime, Alibaba has invested $91.7m to take a 34% stake in its regional logistics arm Quantium Solutions.

Sing Post raised its interim DPS to 1.5¢ (3QFY15: 1.25¢).

At the current price, SingPost is trading at 17.6x consensus forward P/E. and indicative dividend yield of 5.2%, which probably has factored in the overhang from its recent corporate governance issues.