SingPost – CIMB
Boosted by logistics revenue
• Above; maintain Neutral. 3Q10 earnings of S$44.1m (+20.6% yoy) were 8% above consensus and our estimates, accounting for 29% of our full-year estimate. The outperformance came from higher-than-expected revenue. We have raised our FY10-12 estimates by 2-8%. From Jan 2010, onwards, opex would rise due to higher net terminal dues for international mailing. After adjusting our DPS assumptions, our DDM-derived target price (discount rate 7.3%) also rises from S$1.09 to S$1.11. Although dividend yields are rather attractive at 6%, we remain Neutral on the stock due to a lack of catalysts.
• Logistics revenue drove growth. Revenue grew 12.7% yoy to S$139.6m, thanks to an improving economy and contributions from Quantum Solutions (QS). 9M09 net earnings grew 9.3% yoy to S$124.1m. In line with expectations, 3Q10 dividend was 1.25cts/share.
• Improving economy boosted topline. Mail revenue dipped 1.2% yoy on declines in domestic and philatelic mail, slightly offset by higher international and hybrid mail. Logistics revenue growth of 166% was attributed mainly to QS. Retail revenue was up 4.1% yoy. Rental and property-related income rose 22.2%, thanks to higher rental income from Singapore Post Centre and the leasing of space at repurposed post-office buildings. Operating expenses climbed 8%, because of the consolidation of QS.
• Outlook. SingPost is cautiously optimistic on its outlook, given an improving economy. We believe that more acquisitions could be in the pipeline as part of its regional expansion strategy, which means that cash could be preserved for this purpose. It has maintained its dividend policy of a minimum 5cts/share.