Author: tfwee
SingPost – BT
SpeedPost has a challenger
Yamato launches Ta-Q-Bin service; eyes 50% market share in 10 years
YAMATO Transport is taking SingPost head on in the local parcel delivery segment, launching its Ta-Q-Bin service yesterday as an alternative to the latter’s SpeedPost service.
Muscling in on SingPost’s dominance of the 10 million annual deliveries market, Yamato plans to capture 4 per cent of the pie within the first year and 50 per cent within the next 10 years.
Kaoru Seto, president of parent company Yamato Holdings, said: ‘Yamato aims to achieve annual delivery volume of 400,000 parcels in the first year of Ta-Q-Bin’s operation in Singapore and hopes to increase the number to 8 million parcels in the next 10 years.’
Yamato has invested 3.1 billion yen (S$46.6 million) initially in the new service with five distribution centres – in Ang Mo Kio, Pasir Panjang, Ubi, Penjuru and Anson Road – and some 40 employees and 26 vehicles.
The company expects to take in 201 million yen in revenue in the first year, break even in three years’ time and recover its investments within six years. It expects to be turning over four billion yen from the business within 10 years and is aiming for annual profits of 400 million yen within the same timeframe.
The Ta-Q-Bin service in Singapore will initially start off with three services: basic parcel delivery, chilled and frozen package delivery, and payment on delivery. The latter two services are not offered by current parcel delivery providers, and Yamato aims to price its parcel delivery service very competitively to break into the local market.
Yamato offers a much wider range of services in Japan, which it is working with partners to set up in Singapore as well. These include shopping delivery services, online shopping delivery and maintenance supply services.
Potential partners that it is negotiating with in Singapore are mainly Japanese chains such as Takashimaya, Meiji and Isetan, as well as Cold Storage, said Yamato Transport (S) managing director Naoki Toda. He estimated that it would take 1-2 years to launch these services here.
Other potential areas for growth in Singapore are in the broader business-to-consumer (B2C) market, mail order services and the e-business market, Yamato Transport Co president Makoto Kigawa added.
Yamato is also using Singapore as a springboard to expand into other parts of the region. Potential targets are Malaysia and Thailand, Mr Kigawa said. It is starting a similar service in Shanghai on Jan 18 and will expand to Hong Kong and Beijing from there.
The group plans to invest 10 billion yen on expansion in the region within the next two years. ‘We would like to think of Asean as a whole market,’ Mr Kigawa said.
While reiterating that Yamato’s projections are ‘just an ambition’, he believed that the group has a ‘high chance’ of achieving its 10-year forecast.
SingTel – BT
Bharti gets nod from Bangladesh to buy Warid
It will purchase a 70% stake from owner Dhabi Group
A bid by Indian telecoms giant Bharti Airtel to purchase Bangladesh’s fourth largest mobile phone operator Warid has been approved, regulators said yesterday.
Abu Dhabi-based Dhabi Group, which fully owns Warid Telecom, last month sought approval from the Bangladesh Telecommunications Regulatory Commission (BTRC) for the sale of a 70 per cent stake in Warid.
‘The commission has given the go-ahead to transfer (Dhabi Group’s) Warid telecom shares to Bharti Airtel,’ the director general of BTRC, Ahsan Habib, told AFP yesterday.
The purchase makes Bharti the latest foreign company to make in-roads into the fast-growing Bangladesh mobile market.
‘The commission has also approved investment of US$300 million by Bharti Airtel for the expansion of their telecommunication network across the country,’ Mr Habib added.
Launched in May 2007, Warid had nearly three million subscribers – out of nearly 52 million overall – at the end of October 2009.
As the industry expands in Bangladesh, analysts predict that the number of mobile customers will pass 100 million by 2015, fuelled by a price war among the country’s six operators.
In 2004, Egyptian Orascom took over Sheba and Singapore’s state-owned SingTel bought a 45 per cent stake in Bangladesh Telecom in 2005.
Last year, Japan’s NTT DoCoMo paid US$350 million to buy a 30 per cent stake in operator Aktel, majority owned by Malaysia’s Axiata.
The move into Bangladesh by Bharti comes after its plan to ally with South Africa’s MTN to create an emerging market telecom giant collapsed in September when Pretoria said that it feared that MTN might lose its ‘national character’.
Analysts said that Bharti, which has more than 100 million subscribers in India, will need to expand abroad to increase revenues with earnings growth slowing in its home market, which has become crowded by new players. — AFP
STEng – DBS
Back on the growth track
• Recent MRO contract wins in US point to aviation market recovery, as well as growing 3rd party
outsourcing
• Expect defence and infrastructure contract wins on the back of sustained government spending
• War chest of S$1.6bn points to potential acquisitions; 100% dividend payout likely again
• Maintain BUY, TP revised up to S$3.80
MRO outsourcing set to recover in the US. In Dec’09, STE announced a couple of significant MRO contract wins in the US worth about US$230m (including options), after a long dry spell of US-based contracts in the early part of FY09. We believe this could be the start of a recovery in the US aviation market and we could see more airlines willing to outsource their non-core functions to 3rd party MROs like STE. The ongoing recovery in the air cargo market should also fuel the demand for Passenger-to-Freighter (“PTF”) conversions, where STE has an established presence.
Government contracts will underpin revenue growth. Even after 2009’s impressive stimulus package, the Singapore government has indicated that spending will be stepped up in the 2010 budget – due to be announced just a month from now. STE is a key beneficiary of Government spending on defence, transport and infrastructure and we expect strong order flows to support revenue growth in 2010-11.
Maintain BUY, PE premium to STI not normalised yet. In line with the expected recovery, we revise up our EPS estimates slightly by 1-4% over FY09-11 and raise our TP to S$3.80 – pegged to 23x FY10 earnings. We expect STE to sustain its 100% dividend payout when it announces FY09 results next month, translating to a yield of 5.0% for FY10 and 5.4% in FY11. With over S$1.6b in gross cash following the US$500m bond issue in 2H-FY09, acquisitions are on the cards as well, which will spur its growth to a higher platform.
M1 – DBS
Capital management potential
• We expect at least 9% cash yield from capital management in addition to 7% dividend yield.
• Not much risk to stable FY10F earnings, despite higher competition, due to cost savings from
backhaul network.
• M1 has slightly underperformed STI by 1% since our downgrade on 22 Oct 09. Upgrade to BUY with revised TP of S$2.15 based on 13x FY10F (12x earlier)
We estimate S$160m-185m (DPS of 18-21 Scents) from potential capital management exercise. In the past, M1 has returned excess cash regularly to shareholders except for 2008 and 2009, when capex was
higher due to the construction of the backhaul network. M1 is past its peak capex in 2009 with the completion of the backhaul network. Our model suggests that M1 can easily pay out S$160m-S$185m to its shareholders, based on its free cash flow. Paying out S$160m in capital management would raise its net debt to EBITDA from 0.7x to 1.2x, still well below its target 1.5x-2.0x.
Would it be special dividends or capital reduction? M1 has done both in the past. We believe that options would be one-time special dividend, special dividends at regular intervals or capital reduction. In any case, we expect the share price to benefit from these actions. We believe that a capital management exercise could be announced with 1Q10F results.
Backhaul savings of S$10-15m helps to underpin stable FY10F earnings. We use 13x PER compared to 12x previously to account for capital management potential in FY10F. Based on 13x FY10F PER, our revised target price is S$2.15.
SingPost – DBS
Downgrade on valuation grounds
• Singpost’s CEO, Mr, Wilson Tan has stepped down to pursue other opportunities.
• With Dy CEO, Mr Ng Hin Lee taking care of Singpost in the interim, we don’t see any
discontinuity.
• The stock has done reasonably well in the last two months. Downgrade to HOLD for limited
upside.
The departing CEO has achieved what was expected of him. Mr. Wilson Tan joined Singpost in Oct 07 and was expected to focus on regionalization of Singpost’s business. In his 15 months tenure, he is credited with two good acquisitions, which have helped Singpost to expand its business in the region and monetize its intangible assets.
We don’t see any operational discontinuity. Singpost’s board would be actively pursuing the search for a new CEO, while CFO Mr Ng Hin Lee, who was promoted to Dy. CEO role last week, would take care of the company in the interim. We think that Singpost can continue to deliver as many of the strategic initiatives are already in place and execution should not be a problem with an experienced management team at each segment level.
Downgrade to HOLD on valuation grounds. Based on 6% yield (average historical yield), our target price remains unchanged at S$1.05, which translates to 13.5x FY10F PER, still at 10% discount to its average historical PER of 15x. We see potential upside of 3% with 6.5% dividend yield. The stock could be re-rated if (i) Singpost is able to grow its regional business through acquisitions further, or (ii) Singpost can monetize its HQ building.