Press Release

Financials

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.

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.

On the growth path

• Healthy results
  
• Lower reliance on mail
  
• Prospects remain bright
  

Results in line

Singapore Post (SingPost) reported a 8.1% YoY rise in revenue to S$220.3m and a 5.5% increase in net profit to S$37.6m in 2QFY15, such that 1HFY15 revenue and net profit accounted for 48% and 50% of our full year estimates, respectively. Mail revenue rose 3.2% YoY to S$123m in 2QFY15, boosted by increased ecommerce transshipments in the international mail business line. This offset the decline in the traditional postal business in domestic mail and hybrid mail, which remain challenging. Logistics revenue rose 15.1% YoY to S$109m, while group operating margin remained steady at 21%, similar to a year ago.

Continues to invest for the future

In the past few months, the group continued to invest in its various business segments. Strategic investments include the acquisition of FS Mackenzie (UK), Tras-Inter Co (Japan), The Store House (HK) and Axis Plaza (Malaysia). SingPost has also been upgrading its postal infrastructure in Singapore; out of the S$100m investment, S$45m was for mail sorting machines which will be fully operational in Dec.

Mail as a % of total revenue lowest in history

Meanwhile, we note that mail accounted for 56% of total revenue in 2QFY15, the lowest the group has seen in its history. This used to be more than 75% in as recent as 2009, and has been decreasing over the years as SingPost sought to reduce its reliance on the mail business. This underscores the group’s efforts to build its other business segments such as logistics, retail and ecommerce.

E-commerce related revenue grows 20% YoY

Indeed, SingPost’s ecommerce-related revenue for 1HFY15 accounted for about 27% or S$116.1m of total revenue, representing a 20% YoY growth. With close to 1,000 ecommerce customers across the group and ecommerce package volumes registering double-digit growth YoY, we increase our FCFE growth rate assumption from 9% to 10% in our 3-stage DCF model, resulting in a slightly higher fair value estimate of S$2.17 (prev. S$2.09). In line with its usual practice, SingPost has declared an interim quarterly dividend of 1.25 S cents per share, payable on 28 Nov 2014. Maintain BUY.

On the growth path

• Healthy results
  
• Lower reliance on mail
  
• Prospects remain bright
  

Results in line

Singapore Post (SingPost) reported a 8.1% YoY rise in revenue to S$220.3m and a 5.5% increase in net profit to S$37.6m in 2QFY15, such that 1HFY15 revenue and net profit accounted for 48% and 50% of our full year estimates, respectively. Mail revenue rose 3.2% YoY to S$123m in 2QFY15, boosted by increased ecommerce transshipments in the international mail business line. This offset the decline in the traditional postal business in domestic mail and hybrid mail, which remain challenging. Logistics revenue rose 15.1% YoY to S$109m, while group operating margin remained steady at 21%, similar to a year ago.

Continues to invest for the future

In the past few months, the group continued to invest in its various business segments. Strategic investments include the acquisition of FS Mackenzie (UK), Tras-Inter Co (Japan), The Store House (HK) and Axis Plaza (Malaysia). SingPost has also been upgrading its postal infrastructure in Singapore; out of the S$100m investment, S$45m was for mail sorting machines which will be fully operational in Dec.

Mail as a % of total revenue lowest in history

Meanwhile, we note that mail accounted for 56% of total revenue in 2QFY15, the lowest the group has seen in its history. This used to be more than 75% in as recent as 2009, and has been decreasing over the years as SingPost sought to reduce its reliance on the mail business. This underscores the group’s efforts to build its other business segments such as logistics, retail and ecommerce.

E-commerce related revenue grows 20% YoY

Indeed, SingPost’s ecommerce-related revenue for 1HFY15 accounted for about 27% or S$116.1m of total revenue, representing a 20% YoY growth. With close to 1,000 ecommerce customers across the group and ecommerce package volumes registering double-digit growth YoY, we increase our FCFE growth rate assumption from 9% to 10% in our 3-stage DCF model, resulting in a slightly higher fair value estimate of S$2.17 (prev. S$2.09). In line with its usual practice, SingPost has declared an interim quarterly dividend of 1.25 S cents per share, payable on 28 Nov 2014. Maintain BUY.