SingPost – CIMB

G3AP contribution offset lower mail revenue

• In line. 1Q10 earnings of S$39.4m (-0.1% yoy) are in line with consensus and our estimates, accounting for 27% of our full-year estimate. Revenue grew 0.7% yoy to S$121.8m despite a poor economic environment, thanks to contributions from G3 Worldwide Aspac Pte Ltd (G3AP). 1Q10 dividend was 1.25cts/share.

• G3AP boosted logistics revenue. Mail revenue fell 7.2% yoy on declines in domestic and international mail, slightly offset by higher hybrid mail and philatelic. Logistics revenue growth of 90.7% was attributed to higher warehousing, fulfilment, distribution and the inclusion of G3AP revenue for the first time, offset by lower Speedpost revenue. Retail revenue was flat yoy. Rental and property-related income went up 38.4%, thanks to higher rental income from Singapore Post Centre (SPC) and the leasing of space at repurposed post office buildings. Operating expenses rose 5.5%, because of the consolidation of G3AP.

• Sale of SPC not in sight. During last evening’s conference call, management said that SingPost is not looking to divest SPC for now. It will continue to explore opportunities to enhance the building’s value. Occupancy rate is around 97.9% with around 50% of its net lettable area leased to third parties.

• Outlook. SingPost will continue to focus on direct mail expansion. We believe that more acquisitions could be in the pipeline (so far it has acquired G3AP and Postea). The dividend policy of a minimum 5cts/share remains.

• Maintain Neutral; we have increased DPS assumptions given an improving macro outlook. Correspondingly, our DDM-derived target price (discount rate
8.5%) has been raised to S$0.88 from $0.80. Although dividend yields are attractive at 7%, we remain Neutral on the stock due to limited upside to its share price. No change to our earnings estimates.

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