SingPost – OCBC

AWAITING NEWS OF LARGER ACQUISITIONS

  • Self-storage company for S$37m
  • Also acquires freight forwarding firm
  • Enhances logistics & e-commerce capabilities

Building its non-mail businesses

In recent months, Singapore Post (SingPost) has been acquiring stakes in companies to build its non-mail businesses – it completed the 100% acquisition of General Storage Company Pte Ltd (GSC) in end Jan for S$37m and the 62.5% acquisition of Famous Holdings Pte Ltd (FH) in end Feb this year for S$60m.

Acquired self-storage company and freight-forwarding firm

GSC operates a self-storage business in Singapore, under the Lock+Store brand. This is not a new business area for SingPost, which has been offering self-storage solutions through S3 (Self Storage Solutions) since 2009. The acquisition will add storage facilities in Tanjong Pagar and Chai Chee for SingPost. Meanwhile, FH is a Singapore-based sea freight consolidator and freight-forwarder. SingPost acquired a 62.5% stake, and there is also an option to transact the remaining 37.5% stake at the end of 2015. Founded in 1988, FH has a regional network with offices in six countries.

Synergies with logistics and e-commerce

Self-storage solutions offer synergies with SingPost’s existing businesses in logistics and e-commerce – delivery and other value-added services can be added to storage solutions. With its network of properties including post offices and delivery bases, SingPost is able to provide integrated services spanning warehousing, fulfillment, delivery and distribution. The selfstorage business is also a good usage option for SingPost’s properties that are industrial-zoned. Meanwhile, FH’s freight-forwarding capabilities complement SingPost’s e-commerce logistics capabilities in regional fulfillment and warehousing, as well as its postal & parcel delivery networks.

Maintain HOLD

SingPost had S$661.5m in cash and cash equivalents, along with financial assets worth S$36.5m, as at Dec 2012. In comparison, these acquisitions remain on a relatively small scale and we are awaiting news of larger acquisitions. Meanwhile, the stock has been trading in a range of S$1.18-S$1.23 since we downgraded it to HOLD on 28 Jan. We like SingPost’s stable operating cash flows and consistent dividends, but see few re-rating catalysts for now. Maintain HOLD with S$1.23 fair value.

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