Singpost – OCBC

Still on the lookout for growth

  • No surprises in results
  • Still exploring investment opportunities
  • To redevelop retail space in SPC

Results in line

Singapore Post (SingPost) reported a 7.6% YoY rise in revenue to S$239.6m and a 7.3% increase in net profit to S$42.2m in 3QFY15, such that 9MFY15 revenue and net profit accounted for 75% and 77% of our full year estimates, respectively. Mail revenue fell 2.3% YoY to S$130.1m in 3QFY15, due to lower contributions from domestic and international mail; this despite a postage rate hike from Oct last year. Logistics revenue increased 20.7% YoY to S$122.1m, aided by positive contributions from new acquisitions. We understand that if the impact of the acquisitions were excluded, segment revenue would have been relatively flat. Retail & eCommerce saw a 1.3% rise in revenue in the quarter to S$22.9m.

Mail remains challenging

In the quarter, domestic mail revenue fell 1.7% YoY while international mail revenue declined 2.7% as the transshipment business becomes increasingly competitive with more commercial operators in the region. In the face of such competition, the group decided not to sacrifice margins for the sake of revenue. Meanwhile, Singapore, which is classified as an industrialized country by the Universal Postal Union, pays higher Terminal Dues (TDs) or settlement rates for delivery of outbound mail at country of destination. TDs have increased by up to 42.6% over the past years, and have been weighing on the international mail business.

To continue exploring opportunities

Looking ahead, the group plans to continue exploring investment opportunities in Asia Pacific as part of its growth strategy. It has been expanding its end-to-end eCommerce logistics solutions network in the region and investing in eCommerce logistics infrastructure, technology and capabilities. Meanwhile, SingPost also announced that it intends to redevelop the retail space in Singapore Post Centre. However details are scarce for now as the group has so far only appointed consultants to advise on such redevelopment. Rolling forward our valuations, our fair value estimate rises slightly from S$2.17 to S$2.19. Maintain BUY.

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