Singtel – Maybank Kim Eng
SingPost opens up to Alibaba
- Alibaba, one of the world’s most successful e-commerce companies, is investing SGD312.5m in associate SingPost.
- A strategic collaboration could raise the valuation of SingTel’s 25.8% stake in SingPost. Every 35 SGD cts rise in SingPost’s share price adds 1 SGD ct to SingTel’s SOTP valuation.
- Reiterate BUY on SingTel with SOTP-based TP of SGD4.35.
Alibaba taking a 10% stake in SingPost
Singapore Post, a 25.8%-owned associate of SingTel (23.5% post placement), has announced an investment by Alibaba Group, which is seeking an IPO in the US. Post deal, Alibaba will own 10.35% or 220.1m SingPost shares. The SGD312.5m proceeds will be used for e-commerce investments or M&A in Southeast Asia and upgrade of IT systems related to e-commerce logistics (33%), M&A and property development (33%), and general working capital (34%).
A slight positive for SingTel’s valuation
Alibaba, one of the world’s most successful e-commerce companies, runs a highly-popular Taobao online marketplace. Its B2B platform is reported to power 80% of online commerce in China, and its Alipay e-payments system processed USD519b in online payments in 2013, nearly three times the USD180b cleared by PayPal. On the other hand, SingPost has built a successful e-commerce logistics platform mainly in Southeast Asia.
The two companies have signed an MOU to discuss a partnership that will allow Alibaba’s customers and merchants to have access to SingPost’s international logistics capabilities, infrastructure and delivery networks.
SingPost accounts for SGD0.05 (or 1%) of our SOTP value of SGD4.35 for SingTel. Alibaba’s entry could raise the valuation of SingPost over time. In the medium term, we believe the market will shrug off the fact that the placement price of SGD1.42 is lower than the pre-trading halt price of SGD1.55. Every 35 SGD cts gain in SingPost’s share price will add 1 SGD ct to our SOTP TP for SingTel.