Monday, August 5, 2013

Singapore Post: Expecting another steady quarter (OCBC)

Singapore Post:
Fair value S$1.32
add: 12m dividend forecast S$0.06
versus: Current price S$1.32

Expecting another steady quarter
• Expecting steady results
• More acquisitions along the way
• Improved positioning

Singapore Post (SingPost) will be announcing its 1QFY14 results after market close on 2 Aug 2013. We expect net profit to be around S$35m, which would represent about 24% of our full year estimate. Expenses are likely to remain elevated due to inflationary cost increases, growth in volume-related expenses and other administrative costs and continued investments.
Looking ahead, we expect the group to continue to grow inorganically as it will be the fastest way to diversify from the mail business. As the group increases its exposure to faster-growing businesses such as the logistics and e-commerce segments, we increase our terminal growth assumption from 1.5% to 2.0%, thus bumping up our fair value estimate from S$1.23 to S$1.32. Maintain HOLD.

Monitoring expenses in upcoming results
Singapore Post (SingPost) will be announcing its 1QFY14 results after market close on 2 Aug 2013. We expect net profit to be around S$35m, which would represent about 24% of our full year estimate. Expenses are likely to remain elevated due to inflationary cost increases, additional headcount from new subsidiaries, growth in volume-related expenses and other administrative costs. The group is also pressing on in its investments to enhance service quality and productivity. In particular, SingPost will invest more than S$100m in infrastructure (e.g. better sorting machines), services and enhancements over the next few years.

Revenue growth to be partly driven by acquisitions in the short term
The group has been focused on growing its non-mail businesses with the help of acquisitions. For instance, General Storage was acquired in Feb this year to grow SingPost’s self-storage business in the region. A 62.5% stake in Famous Holdings was also acquired early this year, with the aim that its freight-forwarding capabilities will complement SingPost’s e-commerce capabilities in the region. We expect the group to continue to grow inorganically as it will be the fastest way to diversify from the mail business.

Improved positioning, but awaiting further growth
With Quantium Solutions full integrated by now, SingPost has improved its positioning in the regional e-fulfilment business. The increasing popularity of regional e-commerce websites should drive inbound and outbound volumes in Asia, providing further growth opportunities. We look forward to SingPost’s transformation which remains underway. As the group increases its exposure to faster-growing businesses such as the logistics and e-commerce segments, we increase our terminal growth assumption from 1.5% to 2.0%, thus bumping up our fair value estimate from S$1.23 to S$1.32. Maintain HOLD.



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 01/08/13

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