SingPost – Phillip

Catering for growth with new Regional eCommerce Logistics Hub

  • Developing fully integrated eCommerce Logistics Hub in Singapore to cater to expanding ecommerce logistics business and rapid ecommerce market growth.
  • Project is estimated to cost S$182 million and is expected to complete by end Jan 2016; development will be funded internally from Group’s cash holdings.
  • We viewed the new hub development positively, indicating huge growth potential in SingPost’s ecommerce logistics business.
  • Maintain TP at S$2.07; revised rating to Accumulate as share price moved closer to our TP since our initiation on 12 Sep-14.

 

What is the news?

SingPost has recently announced it will be developing a fully integrated regional eCommerce Logistics Hub to cater to its expanding ecommerce logistics business as well as to address global growth in ecommerce market. Located in Tampines LogisPark, the 553,000 sqf hub comprises 3-storey integrated centre, with fully automated parcel sorting facility and 2 warehousing floors, and an adjoining 8- storey office block to house SingPost’s local and regional logistics operations. The logistics hub and adjacent office building will be built on land leased from JTC corporation for 30 years. Construction of the new hub is expected to complete by end Jan 2016. The development cost for the new hub is estimated to cost S$182 million and will be funded internally from the Group’s cash holdings.

How do we view this?

SingPost has a net cash of S$210m (ex S$350m perpetual securities) as of end Jun- 14, giving an excess of S$28m after internal financing of the new logistics hub. With an estimated FY15F cash flow from operations (over S$200m) more than sufficient to meet both dividends to shareholders as well as distributions to perpetual securities holders, we think SingPost would unlikely be gearing up in the short run as it continues its ongoing S$100 investment in postal service and infrastructure enhancement. We view the new eCommerce Logistics Hub development positively, signalling significant growth potential in SingPost ecommerce business.

Investment Action

As the hub would only be ready in 2016, we do not foresee much impact on revenue and margins in the current and the next fiscal year. We make an adjustment on FY15F/16F capex and maintain our TP at S$2.07. While we continue to be positive on the growth prospects, valuation may seem a little stretched at current share price, with forward PE at ~26.5x (impacted by dilution effects on EPS from new share issuance to Alibaba). We revise our rating to Accumulate.

SingPost – Phillip

Catering for growth with new Regional eCommerce Logistics Hub

  • Developing fully integrated eCommerce Logistics Hub in Singapore to cater to expanding ecommerce logistics business and rapid ecommerce market growth.
  • Project is estimated to cost S$182 million and is expected to complete by end Jan 2016; development will be funded internally from Group’s cash holdings.
  • We viewed the new hub development positively, indicating huge growth potential in SingPost’s ecommerce logistics business.
  • Maintain TP at S$2.07; revised rating to Accumulate as share price moved closer to our TP since our initiation on 12 Sep-14.

 

What is the news?

SingPost has recently announced it will be developing a fully integrated regional eCommerce Logistics Hub to cater to its expanding ecommerce logistics business as well as to address global growth in ecommerce market. Located in Tampines LogisPark, the 553,000 sqf hub comprises 3-storey integrated centre, with fully automated parcel sorting facility and 2 warehousing floors, and an adjoining 8- storey office block to house SingPost’s local and regional logistics operations. The logistics hub and adjacent office building will be built on land leased from JTC corporation for 30 years. Construction of the new hub is expected to complete by end Jan 2016. The development cost for the new hub is estimated to cost S$182 million and will be funded internally from the Group’s cash holdings.

How do we view this?

SingPost has a net cash of S$210m (ex S$350m perpetual securities) as of end Jun- 14, giving an excess of S$28m after internal financing of the new logistics hub. With an estimated FY15F cash flow from operations (over S$200m) more than sufficient to meet both dividends to shareholders as well as distributions to perpetual securities holders, we think SingPost would unlikely be gearing up in the short run as it continues its ongoing S$100 investment in postal service and infrastructure enhancement. We view the new eCommerce Logistics Hub development positively, signalling significant growth potential in SingPost ecommerce business.

Investment Action

As the hub would only be ready in 2016, we do not foresee much impact on revenue and margins in the current and the next fiscal year. We make an adjustment on FY15F/16F capex and maintain our TP at S$2.07. While we continue to be positive on the growth prospects, valuation may seem a little stretched at current share price, with forward PE at ~26.5x (impacted by dilution effects on EPS from new share issuance to Alibaba). We revise our rating to Accumulate.

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