SingPost – DBS

Downgrade on valuation grounds

• Singpost’s CEO, Mr, Wilson Tan has stepped down to pursue other opportunities.
• With Dy CEO, Mr Ng Hin Lee taking care of Singpost in the interim, we don’t see any
discontinuity.
• The stock has done reasonably well in the last two months. Downgrade to HOLD for limited
upside.

The departing CEO has achieved what was expected of him. Mr. Wilson Tan joined Singpost in Oct 07 and was expected to focus on regionalization of Singpost’s business. In his 15 months tenure, he is credited with two good acquisitions, which have helped Singpost to expand its business in the region and monetize its intangible assets.

We don’t see any operational discontinuity. Singpost’s board would be actively pursuing the search for a new CEO, while CFO Mr Ng Hin Lee, who was promoted to Dy. CEO role last week, would take care of the company in the interim. We think that Singpost can continue to deliver as many of the strategic initiatives are already in place and execution should not be a problem with an experienced management team at each segment level.

Downgrade to HOLD on valuation grounds. Based on 6% yield (average historical yield), our target price remains unchanged at S$1.05, which translates to 13.5x FY10F PER, still at 10% discount to its average historical PER of 15x. We see potential upside of 3% with 6.5% dividend yield. The stock could be re-rated if (i) Singpost is able to grow its regional business through acquisitions further, or (ii) Singpost can monetize its HQ building.

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