SingPost – OCBC

STEADY DELIVERY IN 3QFY12

Results in line with our expectations

Room for more share buyback and gearing

Declares 1.25 S cents interim dividend

3QFY12 results in line with our expectations.

Singapore Post (SingPost) reported a 0.6% YoY rise in revenue to S$149.4m but a 5.2% fall in net profit to S$41.6m in 3QFY12. 9MFY12 revenue and net profit were in line with our expectations, accounting for 75.6% and 74.6% of our full-year estimates, respectively. However, 9MFY12 net profit made up 81.0% of the street’s estimate (Bloomberg consensus: S$137.5m). On a segmental breakdown, the logistics and retail divisions posted improved revenues in 3QFY12, while mail saw lower contributions due to a decline in domestic and international mail volume.

Comfortable with net gearing of 2x.

The group’s net gearing has increased from 0.5x as at 31 Mar 2011 to 0.75x as at 31 Dec 2011, but there is still room for further increase as management mentioned that it is comfortable with a level of 2x. The reason behind the higher leverage ratio is not because of higher borrowings, but due to cash deployed for investment purposes (more investments in associates and JVs) and share buybacks (hence more treasury shares and lower equity).

Room for another ~8% in share buyback mandate.

According to its share purchase mandate, SingPost may purchase no more than 10% of its issued shares. The group has bought back about 1.78% of its issued share capital (based on 22 Sep 2011 announcement) and has room for about ~8% more. The price paid per share for its last buyback was S$1.04, which is higher than the current stock price.

Maintain BUY.

In line with its usual practice, SingPost has declared an interim dividend of 1.25 S cents per share that is payable on 29 Feb. The stock price has risen by about 4.8% since we upgraded it from Hold on 5 Jan, but we still see an upside potential of 16.3% (not inclusive of a forecasted dividend yield of 6.4%) based on our fair value estimate of S$1.14. Maintain BUY.

SingPost – OCBC

STEADY DELIVERY IN 3QFY12

Results in line with our expectations

Room for more share buyback and gearing

Declares 1.25 S cents interim dividend

3QFY12 results in line with our expectations.

Singapore Post (SingPost) reported a 0.6% YoY rise in revenue to S$149.4m but a 5.2% fall in net profit to S$41.6m in 3QFY12. 9MFY12 revenue and net profit were in line with our expectations, accounting for 75.6% and 74.6% of our full-year estimates, respectively. However, 9MFY12 net profit made up 81.0% of the street’s estimate (Bloomberg consensus: S$137.5m). On a segmental breakdown, the logistics and retail divisions posted improved revenues in 3QFY12, while mail saw lower contributions due to a decline in domestic and international mail volume.

Comfortable with net gearing of 2x.

The group’s net gearing has increased from 0.5x as at 31 Mar 2011 to 0.75x as at 31 Dec 2011, but there is still room for further increase as management mentioned that it is comfortable with a level of 2x. The reason behind the higher leverage ratio is not because of higher borrowings, but due to cash deployed for investment purposes (more investments in associates and JVs) and share buybacks (hence more treasury shares and lower equity).

Room for another ~8% in share buyback mandate.

According to its share purchase mandate, SingPost may purchase no more than 10% of its issued shares. The group has bought back about 1.78% of its issued share capital (based on 22 Sep 2011 announcement) and has room for about ~8% more. The price paid per share for its last buyback was S$1.04, which is higher than the current stock price.

Maintain BUY.

In line with its usual practice, SingPost has declared an interim dividend of 1.25 S cents per share that is payable on 29 Feb. The stock price has risen by about 4.8% since we upgraded it from Hold on 5 Jan, but we still see an upside potential of 16.3% (not inclusive of a forecasted dividend yield of 6.4%) based on our fair value estimate of S$1.14. Maintain BUY.

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