Category: SingPost
SingPost – BT
SingPost Q4 profit slides 17% to $30.55m
Group steps up investments in transformational programme to drive future growth; proposes 2.5-cent final dividend
SINGAPORE Post (SingPost) saw net profit for the fourth quarter ended March 31, 2012 slide 17.4 per cent to $30.55 million due to investments put towards a transformational programme to drive future growth.
"During the year, we invested in capabilities and resources in areas such as people, IT and operations and the results – revenue growth in our non-postal business, namely logistics and retail, in spite of challenging conditions – show that we are on the right track. We will continue to invest in the five business pillars – mail, digital services, logistics, e-commerce and retail & financial services," said group chief executive officer Wolfgang Baier. Some $9.7 million has been invested so far in 20 corporate-wide initiatives as part of the programme which will be executed through to FY2014/15.
Faced with a "difficult postal landscape and weaker business environment" as well as increasing cost pressures, SingPost is trying to build new revenue streams in the digital services and e-commerce businesses while pursuing growth in regional logistics and e-fulfilment.
SingPost – Lim and Tan
• The stock has reacted positively to recent news of (a) strong demand for new office space coming up in various parts of the country, including Paya Lebar ($1800 psf for Guthrie‘s development), close to its Post Centre.; (b) successful launch of the $350 mln 4.25% senior perpetual cumulative securities.
• In the process, the stock appears to have ended the technical downtrend that began after it topped up at $1.24 in Oct ’10 from a low of 63.5 cents a year before.
• Key point to note is that full potential of Post Centre has not been tapped. And we are not talking of conversion to residential use, which Sing Post cannot do, as the Post Centre is zoned commercial.
• Of the almost 1.5 mln sf space at Post Centre, 300,000 sf represents office, and the balance retail and industrial.
• We believe in the hands of “experts”, there is much that can be done to enhance shareholders value. (car show rooms?)
• At current price, Sing Post’s market cap is “only” $1970 mln, or simplistically $1330 psf.
• Until then, shareholders should be happy with the “sustainable” 6.1% yield, another strong reason to go for the ordinary shares rather than the 4.25% perpetual securities. (6.25 cents a share for the last 5 years.)
SingPost – Kim Eng
Issuer of excellent pedigree
Potential for higher payout, reiterate Buy. SingPost’s recent issue of $350m in perpetual securities is superior to other issues as it commands the highest debt rating in the market and its 4.25% coupon rate is also the lowest. We see this as an opportune time to remind investors of the company’s financial strength and the fundamental stability of its core mail business. Reiterate Buy on SingPost for its very attractive dividend yield of 6.4%, which we believe is almost guaranteed, based on its history of very stable earnings, even before counting any potential upside from special dividends. Our target price is slightly reduced to $1.05 as we roll forward our valuation basis to FY Mar13F.
Not at shareholders’ expense. The $350m senior perpetual cumulative securities, or Perps, pay a 4.25% coupon, which is higher than SingPost’s overall cost of debt of 3.13-3.5%. With the Perps, the group’s interest expense is expected to double to $26m. Nonetheless, management’s dividend commitment of 6.25 cents per share is intact. In fact, there may be room for dividend upside as SingPost may not use up all the additional funds for acquisitions. And even as the company continues to face cost pressures, our earnings sensitive analysis shows that pre-tax income can withstand a decline of 20% before the payout ratio begins to look too generous on paper.
Time to flex financial muscle? To recap, SingPost has not even used up half the $200m it raised in March 2010 for acquisitions. The additional $350m raised will give the group substantial firepower to gun for bigger acquisitions, if not offer a higher dividend payout or even buy back its own shares that are giving a higher yield than its coupon rate.
Balancing optimal gearing ratio and ROE. Management is comfortable with a gearing level of up to 2x. With Perps being classified as equity, SingPost’s net gearing thus falls from 0.5x as of FY11 to $224m net cash including the Perps. This implies significant debt headroom not only for expansion, but also in support of our argument for higher dividend payouts to optimise its gearing ratio and ROE.
Dividend provides valuation support. We roll forward the basis of our target price to FY Mar13F, using a historical average PER of 14x to arrive at a target price of $1.05, slightly reduced from $1.09 previously. While SingPost continues to face cost pressure, its dividend payout should provide valuation support. Buy for a total return of 15%.
SingTel – BT
SingTel’s US$700m, 5.5-year notes over 4 times subscribed
Three traded perpetual securities see varied performances
SINGTEL’s sale of US$700 million, 5.5-year notes yesterday met with strong demand as the debt market continued to sizzle. The order book for the bonds, which pay a coupon of 2.375 per cent, came to about US$3.25 billion and was more than four times subscribed by investors, said SingTel in a statement.
But those looking for a quick buck trading some of the highly popular perpetual securities are finding that not all perps are the same.
Genting’s 5.125 per cent was selling at $100.65 but SingPost’s 4.25 per cent was trading higher at $101.5/102.5. Olam which has a coupon of 7 per cent was struggling to stay above water at $100.2/100.8.
All the three perps, which were sold within the past 10 days, were priced at $100 plus a typical commission of 0.25 per cent, so the effective cost would be $100.25.
‘One customer complained that Genting is so huge compared to SingPost, so how come Genting is not performing compared to SingPost,’ said a broker.
Genting issued $1.8 billion perps after receiving $6 billion orders. SingPost had orders of $2.5 billion or seven times more than the $350 million issuance.
‘SingPost is exceptional, like it’s small size and it’s got everything,’ the broker added. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Ltd.
Olam’s issuance was $275 million after the order book came to $350 million. One relationship manager said he took orders only from customers who asked for Olam rather than actively market the issue, given its higher risk profile.
Among the three names, SingPost is considered the least risky with an A+ credit rating, said Todd Schubert, Bank of Singapore head of credit research.
Genting has a Baa3/BBB- credit rating while Olam has no credit rating.
‘Given that the entire SGD corporate bond market is less than US$100 billion, Genting represented a significant increment to the current outstanding stock of SGD dollar bond,’ said Mr Schubert. ‘The large size of Genting vis-a-vis Olam and SingPost and relative to the size of the market limits Genting’s uniqueness factor,’ he said.
Said Hartmut Issel, head of UBS Wealth Management Research Singapore: ‘We had very low issuance activity in the second half of last year, accompanied by high accumulation of cash during that time. The real attraction in these perpetual securities lies in the lucrative yield they provide.’
Added Wilson Aw, head of UOB Private Banking: ‘Being Singapore dollar denominated, besides appealing to local investors, they also offer an avenue for non-Singapore investors.
‘However, investors should bear in mind, for instance, the subordination of the structure and the higher interest rate risk compared to straight bonds.’
SingTel – BT
SingTel’s US$700m, 5.5-year notes over 4 times subscribed
Three traded perpetual securities see varied performances
SINGTEL’s sale of US$700 million, 5.5-year notes yesterday met with strong demand as the debt market continued to sizzle. The order book for the bonds, which pay a coupon of 2.375 per cent, came to about US$3.25 billion and was more than four times subscribed by investors, said SingTel in a statement.
But those looking for a quick buck trading some of the highly popular perpetual securities are finding that not all perps are the same.
Genting’s 5.125 per cent was selling at $100.65 but SingPost’s 4.25 per cent was trading higher at $101.5/102.5. Olam which has a coupon of 7 per cent was struggling to stay above water at $100.2/100.8.
All the three perps, which were sold within the past 10 days, were priced at $100 plus a typical commission of 0.25 per cent, so the effective cost would be $100.25.
‘One customer complained that Genting is so huge compared to SingPost, so how come Genting is not performing compared to SingPost,’ said a broker.
Genting issued $1.8 billion perps after receiving $6 billion orders. SingPost had orders of $2.5 billion or seven times more than the $350 million issuance.
‘SingPost is exceptional, like it’s small size and it’s got everything,’ the broker added. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Ltd.
Olam’s issuance was $275 million after the order book came to $350 million. One relationship manager said he took orders only from customers who asked for Olam rather than actively market the issue, given its higher risk profile.
Among the three names, SingPost is considered the least risky with an A+ credit rating, said Todd Schubert, Bank of Singapore head of credit research.
Genting has a Baa3/BBB- credit rating while Olam has no credit rating.
‘Given that the entire SGD corporate bond market is less than US$100 billion, Genting represented a significant increment to the current outstanding stock of SGD dollar bond,’ said Mr Schubert. ‘The large size of Genting vis-a-vis Olam and SingPost and relative to the size of the market limits Genting’s uniqueness factor,’ he said.
Said Hartmut Issel, head of UBS Wealth Management Research Singapore: ‘We had very low issuance activity in the second half of last year, accompanied by high accumulation of cash during that time. The real attraction in these perpetual securities lies in the lucrative yield they provide.’
Added Wilson Aw, head of UOB Private Banking: ‘Being Singapore dollar denominated, besides appealing to local investors, they also offer an avenue for non-Singapore investors.
‘However, investors should bear in mind, for instance, the subordination of the structure and the higher interest rate risk compared to straight bonds.’