SingPost – CIMB

No catalyst for stock price

• Not entirely immune to recession. Historically SingPost has been delivering fairly stable earnings thanks to its position as the dominant postal service company in Singapore. However management has cautioned that its business has been affected by declining business activities. Segments which are likely to be adversely affected are the business mail and Speedpost. SingPost is hoping to draw more costconscious customers to use direct mail as a form of advertising, to offset the decrease in other mail revenues.

• Decent dividend yield and no short term need for refinancing. SingPost maintains its dividend policy of a minimum payout of 5 cents/share yearly. We have cut our dividend per share assumptions from 6.0 cents/share to 5.5 cents/share, in view of the deteriorating business environment, resulting in a still attractive 7% yield. The group has S$300m worth of unsecured bonds due in 2013 with fixed interest rate of 3.13% per annum.

• Maintain Neutral; lowered DDM-derived target price to S$0.80 from S$0.88. We have fine-tuned our earnings estimates by 1-2% for FY09-11 to account for lower revenue. Although the dividend yield is attractive, we maintain Neutral due to the lack of catalysts. Re-rating catalysts could include regional growth opportunities and a bigger share of the express mail market.

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