Author: tfwee
SingPost – BT
SingPost Q2 earnings up, helped by one-off items
Revenue up 7.9%, boosted by consolidation of Quantium turnover
SINGAPORE Post (SingPost) chalked up a net profit of $40.5 million for the second quarter ended Sept 30, up 8.3 per cent from the previous corresponding quarter.
The net earnings were higher as a 98.7 per cent fall in share of profit of associated companies and joint ventures to $40,000 from $2.97 million was more than compensated by a $2.93 million amortisation of deferred gain on intellectual property rights and a $2.13 million benefit under the government’s Jobs Credit Scheme. Without the amortisation of deferred gain (which relates to the collaboration with US-based Postea Inc), the government relief scheme and other one-off items, the group’s underlying profit fell 8.6 per cent to $35.4 million.
The three months also saw a boost from a 23.1 per cent rise in rental and property-related income to $10.1 million due to higher rental income from Singapore Post Centre and the leasing of space at re-purposed post office buildings.
Group revenue – which was strengthened by the consolidation of revenue from Quantium Solutions Group (previously known as G3 Worldwide Aspac group of companies) – increased 7.9 per cent to $130.3 million.
Quantium became wholly owned by SingPost in May this year after SingPost acquired the remaining 50 per cent stake in G3 Worldwide Aspac for $15 million.
Earnings per share (EPS) for the quarter came in at 2.104 cents per share, up from 1.943 cents. An interim dividend of 1.25 cents per share will be paid on Nov 30.
Mail revenue decreased 4.4 per cent to $87.6 million, dragged down by lower international mail contributions. Logistics revenue increased 142.6 per cent to $45.6 million, on the back of contributions from Quantium Solutions, which helped to offset lower revenue from Speedpost.
For the fiscal first half year, net profit attributable to equity-holders grew 4 per cent to $79.9 million. Excluding one-off items, underlying net profit declined 6.9 per cent to $72.3 million. Meanwhile, revenue rose 4.3 per cent to $252 million.
Group chief executive officer Wilson Tan said: ‘Although the global economy is showing signs of recovery, the postal industry typically experiences a longer recovery runway. We continue to face unrelenting pressures from the operating environment.’
However, Mr Tan also added that the group will continue to keep an eye on costs as well as pursue new growth opportunities.
SingPost closed at 93.5 cents yesterday, up by one cent.
SMRT – Nomura
First look
SMRT posted a 24% y-y rise in 2Q FY10 net profit to S$52.8mn, well ahead of our and consensus estimate of S$39mn. Higher rail margin and profits, other operating income and a lower tax rate were key reasons for the strong results. While management has guided for higher costs in 2H FY10, on the back of higher electricity rates and interest costs, we expect to adjust our FY10F upwards given the strong performance in 1H FY10. Maintain a BUY with a PT at S$1.96.
2Q FY10 well ahead
SMRT – JP Morgan
2Q FY10 results: strong rental and non-operating income cushioned CCL losses
• Net profit surprised on the upside, helped by better rental and nonoperating income: 2Q FY10 net profit of S$52.8MM (+24.1% Y/Y) was significantly above expectations, bringing 1H10 net profit to S$101MM. This strong set of results was helped by robust rental and non-operating income from maintenance and related contracts.
• Train ridership growth slowed, CCL losses prevail: Ridership was up by a mere 2.2% for the quarter even after incorporating CCL Stage 3 contribution. Operating profit of the train segment was 7% higher, attributed to the non-operating income contribution of S$8.5MM. Stripping that out, operating profit of the train segment actually declined 16% Y/Y. This translates into an estimated loss of S$6MM for the CCL this quarter, in line with our loss estimate. Stages 1 & 2 will open in 1H CY10 and Stages 4 & 5 in 2011.
• Rental business prospects exciting: Operating profit from the rental business increased 10.8% on the back of increased rental space and better yield. The company will refurbish three more Xchanges in FY11 and FY12 – Jurong East (+2,500sqm), Orchard (+1,600sqm) and Esplanade (+2,000sqm), potentially increasing the lettable space by another 20% in the next two years. Rental now accounts for 21% of total operating profit and looks set to increase going forward.
• First foray overseas set to go: SMRT completed its 49% acquisition of Shenzhen Zona. The associate will start contributing in 3Q10. Management expects Zona’s profit after tax in 2010 and 2011 to at least more than double the Rmb24MM in 2008, based on existing fleet size alone, due to lower interest expense. Management expects Zona’s profit contribution to be material in five years’ time.
• Maintain Neutral, raise Dec-10 PT to S$1.90: We raise our earnings estimates by 23%/24%/27% for FY10/FY11/FY12 to incorporate the potential rental contribution from the three new refurbished Xchanges, fare reversion post-June 2010 when the current fare reduction expires, as well as associate earnings contribution from Zona. As a ersult, we increae our Dec-10 PT to S$1.90.
SMRT – DMG
Lower energy costs boosted margins
2QFY10 results above expectations. 2QFY10 registered net profit of SGD52.8m, up 24.1% YoY (+9.5% QoQ), or 31.4% of our full year forecast. The variance was due to lower staff costs which fell 1.1% compared to our forecast of +10.4% as well as the 16.9% decline in energy cost. Operating profit rose 20.1% YoY boosted by MRT (+7%), bus (+272%) and retail rental (+11%). We raise our FY10 net profit by 9% to S$183m from S$168m while maintaining our TP at S$2.00.
Ridership growth still sluggish; stronger growth expected in FY11. Between Jan-Sep, SMRT’s daily rail ridership rose a mere 3.2% YoY to 1.42m. We are, however, upbeat that ridership figures could be stronger next year on the back of stronger economic and tourism growth. The Circle Line will be fully operational in 2011, which will be the gateway to the two Integrated Resorts. We forecast rail ridership growth of 4% in FY10 and a stronger 10% in FY11, in anticipation of positive spin offs from these resorts which will radiate tourists and locals alike towards these locations.
Higher operating expenses expected in 2HFY10. Management cautioned that 2HFY10 profitability will be impacted by the 11% increase in electricity tariff which has been contracted for the period between 1 Oct 2009 and 30 Sep 2010. Apart from higher energy costs, management expects operating expenses to rise due mainly to more scheduled repairs and maintenance, and higher staff and related costs as headcount is expected to be higher with the operation of Circle Line Stage 3, increased train runs and recruitment of bus service leaders.
At its lower range of its 14-20x trading band. SMRT currently trades at ~14x FY10 P/E multiple which is at the lower range of its 14-20x trading band. We view SMRT as an ideal switch play for investors with a defensive mandate, given the 7-month market surge. SMRT has a low beta of 0.45x and strong earnings resilience underpinned by a firmer economic outlook. At our TP of S$2.00, SMRT will trade at an FY10 P/E multiple of 16.5x, a reasonable peg in our view. An interim dividend of 1.75¢ per share was declared for 2QFY10.
SingPost – CIMB
Logistics revenue boosted topline
• Maintain Neutral; DPS assumptions raised given an improving macro outlook. We have raised our earnings estimates by 3-5% on higher logistics revenue assumptions. 2Q10 earnings of S$40.5m (+8.3%% yoy) are in line with consensus and our estimates, accounting for 27.8% of our full-year estimate. Revenue beat our expectations, growing 7.9% yoy to S$130.3m, thanks to contributions from Quantium Solutions Group (formerly known as G3 Worldwide Aspac Pte Ltd). However, the positive impact was negated by a slightly higher-than-expected tax rate. As expected, 2Q10 dividend was 1.25cts/share. 1H10 earnings account for 54% of our full-year estimate. Our DDM-derived target price rises to S$1.09 (discount rate: 7.4%) from S$0.88 after accounting for our higher DPS assumptions and aligning discount rates with our house rates. Although dividend yields are attractive at 7%, we remain Neutral on the stock given a lack of catalysts.
• Quantium boosted logistics revenue. 2Q10 mail revenue slipped 4.4% yoy on declines in hybrid, philatelic and international mail though domestic revenue rose 0.5% yoy. Logistics revenue growth of 142.1% was attributed to the inclusion of Quantium. Retail revenue grew 2.2% yoy with the help of all segments. Rental and property-related income jumped 23.1% yoy to S$10.1m, thanks to higher rental income from SPC (more than 97% occupancy) and the leasing of space at repurposed post office buildings.
• Outlook. SingPost will continue to focus on direct mail expansion. It will also continue to look out for suitable acquisition opportunities. Starting 1 Jan 2010, Singapore will be reclassified as a New Target Country (from Developing Country) by the Universal Postal Union, which will result in higher net terminal dues payments for international mailing (terminal dues payable by Target Countries are generally steeper). SingPost says the annualised impact is about 5% of underlying net profit. This has been factored into our estimates.