SingPost – CIMB
Final dividend as expected
• Within expectations; maintain NEUTRAL. FY10 core net profit rose 10.9% yoy to S$165.0m, 1% above our expectations and consensus. 4Q10’s core net profit of S$40.9m, a rise of 15.8% yoy, was also within expectations and accounts for 24% of our full-year estimate. SingPost announced a final dividend of 2.5 cts/share, in line with our forecast. After raising our FY11-12 earnings estimates by 2-3% as we account for higher logistics revenue, our DDM-derived target price (discount rate 7.3%) rises from S$1.11 to S$1.13. We also introduce our FY13 estimates. Although dividend yields are rather attractive at 5.8%, we remain NEUTRAL on the stock due to a lack of catalysts. Furthermore, operating margins will be affected by higher net terminal dues for international mailing from Jan 2010.
• Logistics revenue drove growth. FY10 revenue grew 9.2% yoy, thanks to logistics revenue growth. Mail revenue fell 2.3% while logistics revenue leapt 140.2% yoy due to the inclusion of Quantium Solutions (QS). Retail revenue rose 2.4% yoy on the back of increased contributions from financial services and retail products. Rental and property-related income rose 20.9% yoy to S$40.4m, driven by higher rental income from the Singapore Post Centre and the leasing of repurposed post office buildings. Operating profit increased 12.9% yoy to S$201.5m, due largely to the inclusion of QS, but was partially offset by lower retail operating profit as a result of higher staff costs and lower contributions from higher-margin financial services.
• 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 given its strong cash position and recent S$200m fixed rates notes issuance. It has maintained its dividend policy of a minimum 5cts/share.